Strong Surge of New Jobs Reported : Economy: Government figures for March leap to a six-year high and show modest growth in California. The news raises fears of inflation among some investors.
The U.S. economy produced more jobs during March than in any month in more than six years, the Labor Department said Friday, but the good news for workers heightened inflation fears among investors already shaken by declines in the stock and bond markets.
Even California showed growth, with a modest increase of 5,800 new jobs helping to cut the unemployment rate to 8.6%, down from 9%, while Los Angeles County’s rate fell to 9.4% from 9.7%.
Still, the state’s recovery--despite increased construction spending for earthquake repairs--remains relatively sluggish and tentative, lagging far behind the national expansion.
“We seem to be in a slow upturn,” said Ted Gibson, chief economist for the state Department of Finance, noting that employment has risen for three straight months.
The federal government’s monthly survey of business payrolls showed that the number of working Americans soared by 456,000 last month, the largest gain since 556,000 in October, 1987.
The national unemployment rate remained unchanged from February, at 6.5%, but that figure is based on a survey of households that recently was revised and still is considered much less reliable than the payroll survey.
For the Clinton Administration, Friday was a day of carefully measured responses, with officials trying to cheer the robust job-creation report while assuaging fears of anxious investors and traders.
“The economy is creating jobs at a good pace, but without the inflationary pressure from the labor market that could ultimately compromise future economic growth,” said Laura D’Andrea Tyson, the President’s chief economic adviser.
Still, the unexpectedly big gain in jobs adds to pressure on the Federal Reserve Board to boost interest rates further. The Fed has moved recently to nudge up rates in order to dampen potential inflation fears; those rate increases, in turn, are frightening investors.
Those fears were reflected in the bond market, open for an abbreviated Good Friday session. Prices fell sharply for the key 30-year Treasury bond, with its interest rate climbing to 7.26%, the highest level since January, 1993. The New York Stock Exchange was closed.
The sharp decline in bond prices was an overreaction by investors who fear that a booming job market will rekindle inflation, said Larry Kimbell, director of the UCLA Business Forecasting Project.
If the extraordinary job gains in March continue for several months, “that would be an outrageous boom and that could lead to a surge of inflation,” Kimbell said. “You can make a case for that, but when I look at everything, it just doesn’t add up.”
Kimbell said inflation appears to be in check for reasons that include stable oil prices and strong national productivity figures. In addition, he noted that many long-discouraged unemployed workers are beginning to return to the job market, adding to competition for jobs and holding down pressure for higher wages.
In fact, a separate report Friday noted that average hourly earnings rose only 0.1% in March, and a scant 2.4% over the past 12 months.
Since last summer, the economy has been adding about 200,000 jobs a month. “March puts us back on track to where we would have been had we not lost so much ground in the bad weather during January,” Labor Secretary Robert B. Reich said at the White House.
The recovery is being paced by consumer spending, which represents two-thirds of the nation’s economic activity. It rose 1% in February, following a revised 0.1% advance in January, for the 11th straight monthly increase, the Commerce Department said Friday.
Spending was helped by an advance in personal income, which rose 1.3% in February, the department said.
Overall, Friday’s economic news demonstrates that there is “a healthy, vibrant recovery, but it’s probably not growing as rapidly as the figures at first blush suggest,” said Robert D. Barr, deputy chief economist with the U.S. Chamber of Commerce.
“That’s important to note, since the stock and bond markets, as well as the Federal Reserve, have been concerned over the past two months that too strong a recovery would push up the inflation rate later this year.”
But the arguments of Barr, Kimbell and their fellow economists may have little effect on the fears that often accompany a slipping stock market.
The fear among various government officials, as well as some private economists, is that the decline in financial markets, fueled by speculation and worry, has a momentum all its own.
The securities markets “are not considering what’s really happened over the last three quarters,” said Audrey Freedman, a labor economist in New York. “If you don’t have good judgment, there are overreactions,” she said.
In the national labor market, there were more than 130 million people working last month, and 8.5 million without jobs, according to the federal household survey.
Manufacturing jobs rose again in March, increasing for the sixth straight month, and construction employment advanced as the weather improved. There were also job gains in such service industries as health care, restaurants and hotels.
California had 14.2 million working residents and 1.3 million unemployed.
Gov. Pete Wilson called the report “encouraging news,” saying California “is coming back, and these numbers are an added boost to confidence as we continue our recovery,” he said.
But while the survey of employer payrolls shows California gaining 29,000 jobs since December, that increase is dwarfed by the employment losses suffered in the state during the recession. Estimates put those jobs losses in the range of 600,000 to 800,000, but the state economy began to pick up this year.
Recently, “we had narrowed our big problems to two areas, defense-aerospace and construction, and now construction seems to be on an upswing,” Gibson said.
“We have the earthquake rebuilding, which is helping, and, additionally, there is a pickup in home-building activity.”
But he said he is worried about rising interest rates. “Housing is key now, we’re not going to get any help from aerospace. I don’t want to see home-building cut off at the knees by the rise in interest rates.”
Los Angeles County’s 9.4% jobless rate reflected 413,000 people out of work, with 3.97 million employed.
“I don’t want to jump for joy, but the numbers seem quite positive,” said Jay D. Horowitz, labor market analyst for the California Employment Development Department, noting that employment in the county has risen by 70,000 in the first quarter of the year.
Among the 11 big states whose jobless figures were reported Friday, California’s rate remained the highest. Next came New York, at 8.1%. The lowest rate was posted by North Carolina, at 4.4%, followed by both Ohio and Massachusetts at 5.9%.
Rosenblatt reported from Washington and Silverstein from Los Angeles.
Jobless Rates
Here are U.S. and California unemployment rates, in percentages, for the past year:
U.S. Calif. March 6.5 8.6 Feb. 6.5 9.0 Jan. 6.7 10.1 Dec. 6.4 8.7 Nov. 6.5 8.6 Oct. 6.8 9.8 Sept. 6.7 9.4 August 6.7 9.0 July 6.8 9.8 June 7.0 9.1 May 6.9 8.7 April 7.0 8.6 March 7.0 9.4
