June’s Joblessness Rate Dips to 5.2% : California’s 4.9% Outperforms 11 Largest States

The nation’s unemployment rate fell slightly to 5.2% in June, despite a continued slump in the nation’s manufacturing and construction sectors, the government said today.

California’s rate was 4.9%, down from 5.4% and outpacing performance in any of the 11 largest states.

The nationwide civilian jobless rate, as measured by a household survey by the Labor Department, dropped from the 5.3% registered in May. The nation’s unemployment rate has been fluctuating close to 5.3% for more than a year.

Private industries produced 92,000 new jobs last month, a weaker number than the 125,000 payroll additions private analysts had been calling for.

Job growth figures are derived from a separate survey of business establishments. That is often considered a more reliable indicator of economic activity than the household survey from which the overall unemployment rate is calculated.

Today’s report, and its evidence of continued sluggishness, was likely to renew debate over whether the Federal Reserve should lower interest rates to spur economic activity.

“The Fed is in a quandary now. From the job creation side, it’s a clear case for the Fed to ease. But with unemployment so low, it’s a very tough call,” said Allen Sinai, chief economist at the Boston Co.

He said the weak job growth demonstrates that the economy is “as close to a recession configuration as we can get without being in one.”

Unemployment has managed to stay relatively low despite sluggish economic activity because the growth of the American work force “has almost ground to a halt in 1990,” Sinai said.

So far this year, only about 290,000 Americans have entered the work force, compared with the 1.5 million Americans who joined the labor force during the first half of 1989.

The nation’s manufacturing sector, which has been on a downward spiral for months, continued its slide as factory payrolls fell by 31,000 jobs. It was the 14th time in 15 months that manufacturing jobs declined.

Since reaching a post-recession peak in March, 1989, about 335,000 factory jobs have been lost.

The number of construction jobs fell for the fourth month in a row, reflecting continued weakness in the housing market, the government said. Construction payrolls, after seasonal adjustment, fell by 14,000.

Meanwhile, the service sector, which has been providing most of the economy’s steam over the past several months, added 83,000 jobs, including 40,000 in the health services industry.

Retail trade businesses lost 7,000 jobs in June, bringing the monthly increases in the first half of this year in that sector to 15,000, half the average for 1989. Wholesale trade added 7,000 jobs while business services added 5,000.

Labor costs, which have been pushing up and are being blamed for fueling the nation’s inflation problems, continued to increase.

Average hourly earnings posted a 0.3% rise in June to $10.01, up from the $9.98 the average worker earned per hour in May.

The Labor Department said the federal government’s hiring of census workers forced it to revise its May figure to 356,000 new jobs on non-farm payrolls, up from earlier estimates of 164,000 new jobs.