Jobless Rate Leaps to 5.3%, Signals Cooling Economy : Dow Rallies on News but Fizzles
Unemployment, rising at the fastest clip in more then three years, jumped to 5.3% last month, the strongest evidence yet of an economic slowdown, the government said today in a report greeted with mixed reactions in financial markets.
Wall Street stocks initially staged a powerful rally, than sank abruptly in the final hour on futures-related trading and uncertainty over the unemployment figures.
The Dow Jones industrial average ended down 2.94 points at 2,381.96,after being up by as much as 25 points. Rises led falls by about 4-3 on moderate New York Stock Exchange volume of 180.812 million shares.
Propelling the 0.3 percentage point gain in the jobless rate was the smallest rise in new jobs since June, 1986, the Labor Department said.
The unemployment increase was the biggest one-month gain since February, 1986.
Mixed Reaction
Economists and financial markets, concerned for months that the persistently heady economy was moving into a period of spiraling price hikes, initially found mostly good news in the report.
But some analysts wondered whether the dramatic increase in joblessness was signaling that the danger now is one not of inflation but of recession.
Roger Brinner of DRI-McGraw-Hill said the data was “about perfect” for prospects of generating a soft landing for the soaring economy--slowing growth just enough to rein in inflation without triggering a recession.
“There’s no question the economy is weakening,” said Washington economist Michael Evans. “But there’s nothing in this report to suggest we are heading into a recession.”
Allen Sinai of Boston Co. Economic Advisers Inc. was more cautious.
He predicted a mild recession later this year and said the economy was “downshifting to slower growth. This is part and parcel of the bloom being off the rose of what has been a booming economy.”
Economists concurred that today’s surprising jump in the unemployment rate will likely be enough to keep the Federal Reserve Board from further tightening credit when it next reevaluates monetary policy in two weeks.
White House Optimistic
White House spokesman Marlin Fitzwater played down the significance of the first rise in unemployment of George Bush’s brief tenure as President, noting that the percentage of working-age Americans with jobs “remains at al all-time high of 63.3%.”
April’s rise in the jobless rate was felt most heavily by men. The unemployment rate among white men rose from 3.6% to 4.0%; for Hispanic men, from 6.5% to 8.3%; for black men, from 9.8% to 10.0%.
Joblessness among white women rose from 3.8% to 4.1%, but dropped for black women from 9.1% to 8.8%.
As for job growth last month, a separate department survey of businesses found that only 117,000 non-farm payroll jobs were created.
At the same time, the Labor Department revised payroll growth for March downward from 180,000 to 171,000. Over the 12-month period that ended in February, an average of 300,000 jobs had been created each month.
