Joblessness and New Jobs Both Increase : Strong Jan. Growth in Payrolls Raises Fears on Inflation

Unemployment edged up slightly to 5.4% last month but unusually robust January growth created 408,000 new payroll jobs and the number of working-age Americans holding jobs reached a record high, the government reported today.

The Labor Department said the unemployment rate rose by 0.1 of a percentage point from the December rate of 5.3%.

But the report showed continued strong growth, something that analysts have predicted would feed inflationary fears and perhaps persuade the Federal Reserve Board to tighten its reins on credit.

The 408,000 new non-farm jobs created last month followed a revised gain of 221,000 in December and nearly matched November’s robust gain of 440,000 new jobs.

‘Stronger Than We Thought’

Analysts had predicted that January job growth would be in the 250,000 range and that any growth of more than 300,000 could trouble the markets.

“It’s a much stronger report than we thought,” said Davis Wyss, chief economist at Data Resources Inc. in Lexington, Mass. “It suggests we are going into the first quarter (of 1989) a lot stronger than we thought, the Fed is going to tighten (credit) and short-term interest rates will be going up.”

The Labor Department said the labor force expanded by nearly 900,000 people, with about 700,000 of them finding jobs, and that a record 62.9% of the working-age population had jobs.

The unseasonably warm weather in much of the country helped construction employment rise by 102,000 jobs last month, the department said. Manufacturing employment also was up for the fourth month in a row, with 45,000 new January jobs split virtually evenly between the durable and non-durable goods industries.

Data Hard to Interpret

There were 260,000 new jobs in the service sector of the economy, with the 135,000 in retail trades accounting for more than half of that figure. Service industries reported adding 75,000 new jobs last month, down from an average monthly gain of 110,000 in that sector throughout 1988.

Janet L. Norwood, commissioner of the department’s Bureau of Labor Statistics, said it is difficult to interpret the January data because of the seasonal pressures on the economy usually triggered by colder weather and the passing of the Christmas season.

“Supported by January’s mild weather and an economy that continues to grow, many of the usual seasonal job reductions did not take place this year,” Norwood told the Joint Economic Committee of Congress.