Unemployment Rises to 6.8%, Spurring Fears About Recovery : Economy: Jobless rate in California again exceeds the national average. It rose to 7.8%, from 7.7%.

TIMES STAFF WRITER

Job growth ground to a halt in October, the government reported Friday, nudging the unemployment rate up to 6.8% from 6.7% and heightening apprehension that the recovery may be faltering.

Further job losses in manufacturing and construction shrank payrolls nationwide by a net of 1,000 jobs over the month--similar to September's performance and decidedly less buoyant than the 24,000-job gain that analysts had expected.

The total number of jobs in the economy--a broader sampling--also remained unchanged.

As expected, the unemployment rate in California also edged up--to 7.8% from 7.7%. The rise reflected a continued worsening of the state's economy, which has been hit hard by defense industry layoffs and department store mergers.

Los Angeles County posted a surprisingly sharp decline in unemployment, the October rate falling to 7.8% from 9.3%. Officials were at a loss to explain the abrupt decline.

But Robert Schrage, a research manager for the California Employment Development Department, noted that unemployment has traditionally gone down during October in Los Angeles due to retailers gearing up for the Christmas season and teachers returning to work after summer vacation.

Meanwhile, the Commerce Department's index of leading indicators--designed to serve as a barometer of future economic trends--slipped 0.1% in September, its first drop in eight months. The index is not always reliable but is widely quoted.

Also, spending on construction of houses, office buildings, factories, highways and other projects rose for the third consecutive month in September but lagged far behind last year's pace, the Commerce Department said.

Construction spending in September jumped 1.1% to a seasonally adjusted annual rate of $406.5 billion, after gains of 0.4% in August and 0.6% in July, the department said. Through the first nine months of the year, however, construction spending was 10.7% below what it was in the same period in 1990, it said.

Although the jobs picture was essentially unchanged from September's situation, economists said the figures added to concern that the recovery may have run out of steam. The news intensified fears by some forecasters that the nation may be heading back into a recession.

Some analysts speculated that the disappointing employment figures would propel the Federal Reserve into cutting its key discount rate--the interest that it charges on loans to member banks. The Fed pushed another key interest rate down last Wednesday.

President Bush, en route to Dallas for a fund-raising trip, renewed his call Friday for lower interest rates, sending presidential press secretary Marlin Fitzwater to tell reporters that Bush thinks interest rates "could go down more."

"Lower interest rates always have been a good way of stimulating the economy," Fitzwater declared.

The bad news also was expected to increase pressure on the White House to come up with new measures to bolster the economy. Although the White House has been considering a tax cut, Bush appears to be having second thoughts about it, and his advisers are divided.

The grim set of statistics depressed some financial markets. Bond prices rose and the dollar fell Friday after the jobs report was made public. Stock prices fell. The Dow Jones industrial average closed at 3,056.80, down 12.30 points from Thursday.

Private analysts were uniformly bearish. Roger Brinner, economist for DRI-McGraw-Hill, a Lexington, Mass.-based economic forecasting firm, called Friday's figures "disappointing" and called for new steps by the Administration to bolster business and consumer confidence.

"After making clear progress since spring, the recovery has now stalled in late summer and early fall," Brinner said. "What is needed to kick it into a second round is job growth, and for that you need business confidence. Frankly, we don't have such confidence."

Lynn Reaser, economist for First Interstate Bancorp in Los Angeles, agreed. Reaser said the figures provided evidence that the economy "is moving sideways." She said the next question was "whether the economy will move down in its next step."

Janet L. Norwood, commissioner of the Bureau of Labor Statistics, painted a similar picture in testimony before Congress, telling the congressional Joint Economic Committee that the jobless rate "essentially has been in a holding pattern since March."

Norwood said of all the major industry groups, only the services sector continued to post any gains in October. The number of jobs in the service industries grew by 100,000 during the month, particularly in the medical field and business-services sector.

The number of factory jobs fell by 32,000 in October for its second decline in a row, erasing the gains made during July and August. Employment in the construction industry fell by 29,000 jobs.

The developments in October brought the number of Americans out of work to just under 8.6 million--up 140,000 from the previous month's level and its highest since the first quarter of this year.

The increase hit hardest at teen-agers, whose jobless rate soared to 18.8% of the work force, from 18%. The unemployment rates for adult women rose to 5.8% of the work force from 5.5%, while that for adult men remained virtually unchanged at 6.4%.

Joblessness among black workers also surged, rising to 12.7% of the work force from 12.1%. However, the rate for Latinos fell to 10.6% from 11.1% in September.

Along with the halt in job creation, the Labor Department reported another sign of stagnation in the economy--the length of the average workweek for rank-and-file production workers shrank by 0.2 hours during October, reversing a similar increase the month before.

The average hourly earnings of production workers were little changed, after adjustment to reflect seasonal patterns.

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