Factory Layoffs Push U.S. Unemployment to 5.4% : Economy: The rise is seen by some as another sign of a recession. But Wall Street reacted positively on hopes that the Federal Reserve would be spurred to lower interest rates.
Unemployment edged up by one-tenth of a percentage point in November to 5.4%, the highest level since January, and factory jobs declined for an eighth consecutive month as the U.S. economy continued to cool, the Labor Department said Friday.
The nation’s economy created 210,000 new payroll jobs last month, virtually all of them in service industries, but the higher-than-expected figure was offset by an unexpected downward revision in October job growth to 93,000 from the 233,000 reported a month ago.
“I think we are near, or headed for, or perhaps already in, some sort of recession,” said Allen Sinai of the Boston Co. Economic Advisers.
“There is increasing weakness in the labor market,” Sinai said, citing the downward revision in October job growth, the uptick in unemployment, and declines in average weekly hours worked and average hourly wages. “All these spell out a weak and weakening economy.”
Even so, the November figures were received warmly by the financial markets, with many traders apparently convinced that the softening economy would prompt the Federal Reserve Board to allow interest rates to fall in coming weeks.
Manufacturing industries lost 27,000 jobs in November, most of them in the troubled auto industry. During the last eight months, goods-producing industries have lost an average of 21,000 jobs a month. During the eight months before that, manufacturing employment had increased by an average of 29,000 a month.
The services sector created 213,000 jobs in November, with the biggest gains in health services, up 40,000; retail trade, up 33,000, and wholesale trade, up 18,000.
The slight gain in unemployment reflected the entry of 410,000 new job-seekers into the civilian labor force. They helped push up unemployment by 168,000 to 6.8 million.
November’s 5.4% rate marked the first time since January that civilian unemployment has broken out of a narrow range of 5.2% to 5.3%. Total unemployment, including members of the armed forces living in the United States, increased to 5.3% from 5.2% in October.
In California, where unemployment has remained below the national average, civilian unemployment rose to 5% in November from 4.8% in October.
Except for the large downward revision in October job creation, which was attributed to an overcount of teachers and other state and local government employees, Friday’s report was in line with expectations of many economists.
“This is consistent with our forecast of a 1.4% annual growth rate in the fourth quarter,” Bank of America economist Michael Penzer said. “Taken together with October, it shows 150,000 new jobs per month on average.”
That rate is somewhat below the monthly average of 160,000 new jobs since June and well below the monthly average of 270,000 posted over the last 2 1/2 years.
“We know manufacturing employment has been falling steadily for eight consecutive months,” Penzer said. “But in 1985-86, we had factory jobs fall steadily for nearly two years, and the economy as a whole kept chugging along. So it’s not all negative out there. There are still jobs; the economy is still growing slowly; so in the longer term I think we’ll escape a recession.”
Since March, Bureau of Labor Statistics Commissioner Janet L. Norwood noted, factory jobs have fallen by 165,000, 100,000 of which were in autos and electrical equipment manufacturing. The pattern continued in November, with 20,000 jobs lost in transportation equipment manufacturing and 8,000 in electrical machinery.
“Manufacturing has been down consistently, and autos is the weakest component of that,” said David Wyss of Data Resources, Inc., a Lexington, Mass., forecasting firm. “Auto sales have been miserable, so they have been cutting back production and employment. It looks as though the economy is slowing more, and faster, than we thought, so the Fed will have to loosen.”
