Economy Slows as Jobless Rate Rises to 5.4%
The nation’s economy created virtually no jobs at all in April and unemployment rose slightly to 5.4% in an unexpected signal of economic weakness, the Labor Department reported Friday.
For the first time in several years, private payroll employment has declined for two consecutive months, pushed downward in part by weakness in construction and manufacturing. Even the service sector, the big job creator of the 1980s, showed signs of softness.
The weak April report, the first statistical snapshot of the nation’s economic performance last month, sharply reduces the likelihood that the Federal Reserve Board will attempt to crack down on a still-stubborn rate of inflation by raising interest rates.
“The economy is in low gear, the goods-producing sector is in trouble, so the next question for the Fed shouldn’t be whether to tighten, but when to ease,” said Irwin L. Kellner, chief economist at Manufacturers Hanover in New York.
“I hope the Fed doesn’t wait until the slump arrives before they ease up,” Kellner added. “Our main threat now is no longer inflation. It’s recession.”
April’s 5.4% civilian unemployment rate was up from 5.2% in March. The overall unemployment rate, when members of the armed forces who live in the United States are taken into account, was 5.3% in April, an increase from 5.1% in March.
“Taken together, the data for the past two months appear to paint a very weak employment picture,” Janet Norwood, commissioner of the Bureau of Labor Statistics, told Congress’ Joint Economic Committee in a prepared statement.
But she noted that the softness appeared in part to be a correction of unusually strong job growth in January and February, which “probably overstated employment strength and may have contributed to the weaker data that we are now seeing.”
Estimates of civilian unemployment in California tracked the national averages exactly, at 5.4% in April, compared with 5.2% in March.
Total non-farm employment as measured by the government’s monthly survey of businesses increased by a mere 64,000 in April. In fact, it was only government hiring of 80,000 temporary Census workers that kept last month’s job creation out of the negative column.
Manufacturing employment declined by 22,000 in April and jobs in durable-goods industries such as automobiles fell 30,000. Norwood noted that some 300,000 jobs have been lost in the manufacturing sector over the last 13 months.
Some of April’s job-creation weakness reflected the fact that unusually warm weather early in the year exaggerated Labor Department records of new jobs, especially in construction.
On average, new job creation this year has been about 225,000 a month, or about 175,000, excluding the Census hires. The monthly average in 1989 was 200,000; in 1988 it was 275,000.
“Private employment has dropped now for two straight months--and that hasn’t happened since 1986,” said David Wyss, an analyst with Data Resources Inc. in Lexington, Mass. “That has to be a bit scary. This should take a lot of pressure off the Fed to tighten.”
Economists generally agreed that the picture so far this year is consistent with the widespread impression of an economy that is slowing but not crashing.
Yet the job slump in April caught many observers by surprise. The consensus forecast was a steady unemployment rate of 5.2% and job creation, excluding Census workers, in the 175,000 to 200,000 range.
“At first sight, the April report is a shocker, much worse than expected,” said Bruce Steinberg, an economist with Merrill Lynch in New York. “But if you look at the details, it wasn’t quite so bad.”
Steinberg said the loss of 100,000 construction jobs in April appears to be a statistical aberration caused by the effect of earlier, seasonal adjustments that were themselves somewhat illusory. He noted that total construction employment stood at 5.3 million in April, about the same level as in December.
Of more potential concern was a slowdown in the rate of growth in service industry employment, which was up 51,000, excluding government hiring, after bigger gains in previous months.
“The service sector has been the mainstay of jobs growth for a decade,” Steinberg said, “and we might be seeing the beginning of a slowdown there.”
The anemic employment picture contrasted with a flurry of other recent reports that showed the economy to be strengthening, if not robust.
This week, the Commerce Department reported stronger-than-expected increases during March in both factory orders and in the government’s chief forecasting index. And last Friday, the government released figures showing that inflation took its biggest quarterly jump since 1981 and was running at an annual clip of 6.5%.
Meanwhile, the Labor Department reported that factory hours and overtime declined slightly in April, while the average work week for the month was unchanged.
U.S. JOBLESSNESS
The Labor Department on Friday reported an increase in the seasonally adjusted jobless rate of 5.4%, up from 5.2% in March. Here is how different categories of employment compare:
CATEGORY APR. MAR. APR. 89 Civilian 5.4 5.2 5.3 Military/ 5.3 5.1 5.2 Civilian Men 4.8 4.5 4.6 Women 4.8 4.7 4.7 Teens 14.7 14.4 14.6 White 4.8 4.5 4.5 Black 10.4 10.6 11.0 Hispanic 8.0 7.7 8.2
SELECTED STATES
How joblessness rates in the 11 most populous states:
STATE APR. MAR. APR. 89 California 5.4 5.2 5.3 Florida 5.7 5.2 5.4 Illinois 6.1 5.5 5.5 Mass. 5.5 5.4 3.7 Michigan 7.3 7.2 6.5 N.J. 4.9 4.7 4.0 New York 4.9 5.0 5.6 N.Carolina 3.8 3.4 4.3 Ohio 5.9 5.5 5.3 Pa. 5.7 5.2 4.4 Texas 6.4 5.6 7.3
