Jobless Rate Falls, but Payroll Growth Is Lowest in 3 Years

The nation’s unemployment rate dipped to 5.2% in May, but--in a sure sign of a slowing economy--job growth fell to its lowest level in more than three years, the government said today.

The jobless rate, taken from the Labor Department’s monthly household survey, fell 0.1 percentage point from April’s 5.3%, in line with the expectations of analysts.

But non-farm payroll growth, taken from a separate survey of business establishments, was up by only 101,000, down from April’s revised growth of 206,000 jobs. The May growth was the lowest month-to-month gain since 84,000 added payroll positions were reported in March, 1986.

For the last three months, an average of only 160,000 jobs have been added to non-farm payrolls each month, down from the robust average monthly gain of 270,000 jobs reported in 1987 and 1988.

‘More Moderate Pace’

“The great American jobs machine is cranking down to a more moderate pace,” said economist Allen Sinai of Boston Co. Economic Advisers Inc. “But the economy does not appear to be headed near-term for a recession.”

Several analysts said after the release of the report today that the data--which included some signs of moderating inflation--would give the Federal Reserve some justification for easing its tight rein on credit, but all agreed such a move was far from certain.

“For a divided Fed it’s a tough call,” Sinai said.

In data that will be hailed by those looking for signs of easing inflation, average hourly wages inched up only 0.1% in May following a 0.7% increase for April. Average weekly earnings fell from April’s $335.04 to $332.51.

The consensus among analysts had been that about 220,000 jobs would be added to the nation’s economy, more than double the number reported by the government.

Such projections have led analysts to predict that the economy will show too much strength for the Federal Reserve to ease its tight rein on credit. But the sluggishness demonstrated by today’s report will likely increase pressure on the central bank to relax monetary policy.

Service-Producing Industries

The service-producing industries again accounted for the overwhelming job growth, adding 134,000 jobs to help offset some of the declines in other economic sectors. But even that number was well down from a revised April gain of nearly 190,000 new service-producing jobs and well off the sector’s 250,000 monthly average gain last year.

In that service sector, transportation and retail and wholesale trade posted job gains but were well below their 1988 averages.

Goods-producing industries reported a net loss of 33,000 jobs, with mining down slightly and construction employment off by 14,000 positions. Manufacturing operations reported a loss of 18,000 jobs from April.

The unemployment rate dipped despite the slow job growth because, the government said, the civilian labor force fell by 49,000 people to 123.6 million. That indicated the influx of students into the summer labor force, generally seen in May or June, did not occur in any great number last month.