Unemployment Drops to 5.3%; 325,000 New Jobs Are Created

The nation’s unemployment rate dipped to 5.3% in October as the economy created more than 300,000 jobs, the government said today in its last major economic report before Tuesday’s presidential election.

The 0.1 percentage point drop in the rate from September’s 5.4% matched June’s rate as the lowest since May, 1974.

Employers added 325,000 jobs last month, more than the average monthly increases of 240,000 in August and September but comparable to last spring’s gains of 300,000 a month.

Nearly 100,000 of October’s new jobs were on assembly lines, more than double the drop of 45,000 manufacturing jobs over the two previous months.

Food Processing Jobs Up

Food processing paced the unusually large manufacturing job gains with 25,000 new jobs logged in October. The department said, however, that the seasonally adjusted increase in those jobs reflected fewer fall cutbacks than would normally be the case because of light summer hiring caused by the drought.

After “several months of drought-related slowdowns, the one-month pickup in manufacturing jobs may thus be somewhat overstated,” said the commissioner of labor statistics, Janet L. Norwood.

Nonetheless, she told the congressional Joint Economic Committee that there are 422,000 more factory jobs now than there had been a year ago.

Interest Rates Static

The unemployment figures sent both bond and stock prices down in early trading as investors gave up hopes that the Federal Reserve Board would move to reduce interest rates after the election, according to analysts.

“There’s no chance of that now,” said Edward Yardeni, chief economist for Prudential Bache Securities Inc. “But, at the same time, I don’t think that the Fed is going to tighten, either, so interest rates will be flat the rest of the year.”

The report said that the percentage of working-age Americans with jobs remained at a record 62.4%.

The number of women holding jobs grew by 320,000 while the number of working men fell by 99,000, according to the Labor Department’s monthly survey of 58,000 households.

Economy Picking Up

Yardeni and other private economists agreed that the economy is picking up steam again after slowing from a growth rate of 3.4% in 1987 to 2.2% in the third quarter of this year.

“A good case is developing that the fourth quarter will show stronger growth than the third,” said Jerry Jasinowski, chief economist for the National Assn. of Manufacturers.

Jasinowski said companies are telling him that their factory orders, which fell 1.9% in September, bounced back again last month.

William Dunkelberg, an economics professor at Temple University, said a record high 34% of small businesses anticipate making major capital investments in the fourth quarter and an expansion-high 25% of them reported unfilled job openings last month.

“Even if you go back to the late 1970s, you don’t get numbers that good,” he said. “The unemployment rate is more likely to keep going down rather than up.”