Jobless Rate Hits 5.3%, but Job Creation Soars
Unemployment rose to 5.3% in November, just above its 14-year low of 5.2% a month before, the Labor Department reported Friday. At the same time, the nation’s resurgent economy generated 463,000 new jobs, nearly twice the number expected.
Analysts had predicted little change in unemployment but were taken aback by the huge expansion of payroll jobs, even though October’s strong job creation record was revised to 238,000 from the 330,000 reported a month ago. November’s jobless rate was spurred by a surge of 578,000 Americans into the labor force.
Wall Street is nervous these days about unexpected displays of economic strength, and renewed fears that the Federal Reserve Board will react by tightening credit depressed bond prices still more and sent stocks in the Dow Jones Industrial Average down 9.60 points.
Economists said the bright spot here was that in the payroll report--based on actual hiring records at more than 300,000 business establishments across the country--71,000 new jobs were in factories, after a 99,000-production-line hiring increase in October.
Indeed, as Bureau of Labor Statistics Director Janet L. Norwood told Congress on Friday, 425,000 new factory jobs have been created so far this year--a sure sign that the economy continues to be paced by an ongoing boom in export industries.
In addition, 55,000 new jobs were in construction, a sector that had been languishing in recent months, and some analysts saw in this a sign that businesses’ investment in plant and equipment is passing from an earlier surge in capital spending on machinery to a new phase in which new plants are being constructed.
Of the 344,000 new jobs in the service economy, which now commands more than 70% of all employment, a strong 28,000 were in the wholesale trade, mostly in durable goods--another hint that export industries are pacing growth.
“Wall Street needed a cooling off in late summer and we seemed to get it,” said Jerry Jordan of First Interstate Bancorp, Los Angeles, referring to the marginally higher unemployment registered in July and August and the relatively weak job growth reported then, especially in manufacturing.
“But now we’re roaring back in October and November--and the markets don’t like it one bit, because now there’s no chance for any near-term easing by the Fed,” he said.
Jordan, in common with other analysts, branded the huge upsurge in the labor market as a “suspect” number perhaps occasioned by undercounting in earlier months.
“How can it grow much more?” Jordan asked. “We’ve absorbed the baby boom. We’ve absorbed the move of women into the labor force. Now there are even shortages of teen-agers,” a group among which unemployment decreased sharply in November, he said.
But the huge increase in labor market participation--to the point where a record 66.5% of all adult Americans are now in the job market, with a record 62.9% of them actually working--seems real enough and is not a creation of the Labor Department’s sometimes-shaky seasonal adjustment process.
More significant still, Jordan said, if the labor force had increased in November at the average monthly pace so far this year, unemployment would have taken a steep dive to just under 5%--a level many economists now believe would be enough below “full employment” to trigger a severe acceleration of inflation.
“The phrase you’re beginning to hear more and more around the country is: ‘We’ve eliminated unemployment,’ ” said Robert F. Wescott of Alphametrics, a Philadelphia economic consultant.
