U.S. Jobless Rate Falls to 5.4%--a 4 1/2-Year Low : Economy: December’s figure caps a year that saw the biggest job gains in a decade. California level drops to 7.4%.
The U.S. unemployment rate dropped to 5.4% in December from 5.6% the month before, hitting its lowest level in 4 1/2 years and capping a year that brought the nation its biggest job gains in a decade, the federal government reported Friday.
California’s job market also continued to show improved health, with its unemployment level falling to 7.4% in December from 7.7% in November. The state wrapped up its first year of job growth since its recession began in 1990.
“What today’s economic reports do is make it perfectly clear that the economy is very strong,” said Robert Brusca, chief economist for Nikko Securities in New York.
Along with being pleased by the strength reflected by the employment reports, analysts were impressed by the friendly reaction of the bond market, which normally is rattled by any hint of economic growth that could ignite inflation.
Interest rate yields on 30-year Treasury bonds fell to 7.86% from 7.88%, suggesting that investors no longer are so worried about inflation jumping any time soon. “The feeling is that the Fed has corralled inflation,” Brusca said.
One of the few discordant notes came from Los Angeles County. Its jobless rate--which, unlike the federal and state figures, is not adjusted for seasonal trends--edged up to 8.1% in December from 8% the month before. Still, even in the hard-hit Los Angeles area, analysts say that the economy appears to be healing.
“You can’t say that employment is roaring back, but at least we’re not showing the substantial month-to-month job losses we started having in 1990,” said Peter Force, labor market analyst for the California Employment Development Department.
Nationally, the decline in the jobless rate dovetailed with a separate monthly survey of employer payrolls showing a 256,000 gain in jobs during December. Moreover, the U.S. figures for November were revised to show a huge increase of 488,000, the highest monthly gain in seven years.
All told, the Labor Department said, 3.5 million jobs were created in 1994, the best yearlong performance since 1984, when non-farm payrolls grew by 3.9 million jobs. Manufacturing alone added 293,000 jobs in 1994, after losing 130,000 in 1993.
Meanwhile, the jobless rate during the year fell from 6.7% in January, when the government began using its current techniques for tracking unemployment.
Clinton Administration officials embraced the reports as evidence of the economy’s improvement during the President’s term. President Clinton declared: “We have grown the private economy as we have cut government.”
Labor Secretary Robert B. Reich added that the report showed that Clinton’s economic strategy had been “a roaring success.”
Private economists were impressed, too. “This is an economy with a lot of growth and a lot of momentum, and it certainly didn’t lose any of that growth or momentum in December,” said Ken Goldstein, an economist for the Conference Board, a business research group in New York.
The news didn’t trigger the customary tumble in bond prices, Goldstein added, because “it’s no surprise we got a strong report, and it will be no surprise when we get one in January. The bond market now realizes that.”
And while workers are upset by skimpy pay increases, the slow growth in hourly earnings is a source of comfort to investors worried about the effect wages have on inflation. For 1994, average hourly earnings rose only 2.8%.
But many economists believe that the Federal Reserve will boost interest rates again when its policy-makers meet Jan. 31 and Feb. 1 to make sure inflation stays under control in the face of the strong economy. The Fed already has raised rates six times since February.
California’s jobless rate remained the highest of the 11 big states whose figures were reported Friday. Florida posted the next-highest rate--6.3%. North Carolina posted the best jobless rate, 3.9%, followed by Ohio, at 4%.
Still, analysts regarded California’s figures as further evidence that the state is emerging from more than four years of severe economic troubles.
The employer payroll survey showed the state gaining 6,900 jobs in December and 19,400 for the year--modest increases, but a welcome improvement from losses that, even by the state’s more conservative measure, exceeded 600,000 from mid-1990 through 1993.
On top of that, the state’s 7.4% jobless rate for December was the lowest that economic gauge has been since February, 1991, when it rested at 7.1%. It also is down from a high of 9% in July.
“You’ve got to be impressed,” said Ted Gibson, principal economist for the California Department of Finance.
In fact, Gibson predicted that when this year’s economic statistics go through a final revision next year, the state figures will look even better. He said that payroll tax revenues received by the state in 1994 suggest that 150,000 to 200,000 jobs actually were added during the year.
Other analysts agreed, saying that it has become increasingly apparent that the payroll survey is missing jobs created at small and newly established businesses.
The 8.1% rate in Los Angeles County reflected employment of 4.047 million, down 56,000 from November’s level. The number of unemployed edged up 3,000, to 358,000. But economists took heart in the fact that the county’s rate, which hovered around 10% for the first eight months of the year, has now settled around 8% for the last four months.
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U.S. Unemployment
December 1994: 5.4%
Source: Department of Labor, AP
