Jobless Rate Dips to 5.6%, Showing Growth

Providing fresh evidence that the national economy is fending off recession and growing slowly, the U.S. jobless rate inched down to 5.6% in June from 5.7% in May, the federal government said Friday.

The government also reported that employers nationally added 215,000 jobs to their payrolls during the month, powered by gains in seasonal industries, such as construction and recreation.

Although the job gain probably was overstated because of quirky counting techniques, the employment reports came as a relief to government officials, private analysts and investors. A barrage of reports indicated that economic growth had virtually halted this spring--a situation that prompted the Federal Reserve on Thursday to cut interest rates for the first time in nearly three years.

“This should put to rest, at least somewhat, the fears of those who thought the economy was coming to a screeching halt,” said Donald H. Straszheim, chief economist of Merrill Lynch & Co. “This is a slowdown, not a stop.”

California’s volatile unemployment rate dropped to 7.6% last month, down from 8.5% in May and back to where it stood in March. Analysts, however, still portrayed the state’s recovery as modest, noting that separate figures showed California posting a mediocre job gain of 16,500 in June.

The national employment reports spurred on an already-robust stock market on Friday. The Dow Jones industrial average shot up 38.73 points, to close at a record 4,702.73.

Bond prices fell sharply after the stronger-than-expected jobs report was released, but most of the loss was recovered after investors had a chance to further interpret the news.

Wall Street, in general, considered the employment reports an indication that the economy will keep growing, albeit very modestly, while inflation remains low. As such, there was little second-guessing about the wisdom of the Fed’s effort to invigorate the economy with an interest-rate cut.

In fact, Straszheim predicted that the Fed will cut rates again when it next meets Aug. 22. Among other reasons, he said that the economy will continue to be slowed for months to come by the impact of the interest-rate increases engineered by the Fed from February, 1994, to February, 1995, which boosted the benchmark federal funds rate from 3% to 6%.

Labor Secretary Robert B. Reich also was pleased but cautious, saying that Friday’s reports warranted “a small sigh of relief.”

“We’re certainly not out of the woods, but the slowdown we saw in April and May doesn’t appear to be as dramatic as we feared,” he said in an interview.

*

Reich cautioned that the reported U.S. job gain of 215,000 probably was inflated by 50,000 to 100,000 because officials tracked growth over a five-week measuring period, rather than the customary four weeks. At the same time, he noted that the loss of 101,000 jobs previously reported for May was revised to a less dramatic decline--46,000.

All told, job growth over the last three months averaged 59,000--well below the 292,000-a-month pace of last year.

Employees’ wages, meanwhile, crept up modestly. Workers’ average hourly earnings in June rose 5 cents to $11.43. From a year ago, the figure is up a slim 3%.

That development was portrayed by Reich as double-edged: “It’s nothing to worry about if you were worried about inflation, but if you’re worried about stagnant wages, it’s nothing to cheer about.”

A related concern was that employment in the relatively high-paying manufacturing sector dropped by 40,000 in June, bringing to 104,000 the number of factory jobs lost since March.

The nation’s 5.6% jobless rate was the lowest since March, when the level was 5.5%. The monthly job gain was the biggest since February’s 313,000 increase.

California’s jobless rate remained the highest among the 11 big states whose results were reported Friday. Next came New Jersey, at 6.6%, and Texas, at 6.3%. The lowest rates were in Illinois, 4.1%; followed by North Carolina, 4.4%, and Ohio, 4.8%.

The main job gains in California came in construction, services and retailing. There were declines, but very modest ones in three other sectors: wholesale trade, mining and the finance, insurance and real estate category.

In Los Angeles County, the jobless rate--which, unlike the national and state rates, is not adjusted for seasonal trends--rose to 7.4% in June after standing at 6.8% in April and May.

Still, the unemployment rate remains down from 8% in March and from a monthly average of 9.4% last year.

Despite continuing declines in manufacturing, job gains in other industries may be stabilizing the county’s economy, said Peter Force, labor market analyst with the California Employment Development Department.

“The best you can say is that we’re not still declining,” Force said. “Given our experience in the last four or five years, that’s definitely a plus.”

The county’s June figures showed the number of unemployed rose by 27,000 to 324,000, while employment figures declined by 4,000, to slightly over 4 million.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Jobless Rates

Here are U.S. and California unemployment rates, in percentages, over the last year:

U.S. Calif. June 5.6 7.6 May 5.7 8.5 April 5.8 7.9 Mar. 5.5 7.6 Feb. 5.4 7.3 Jan. 5.7 8.2 Dec. 5.5 7.7 Nov. 5.6 7.7 Oct. 5.8 7.7 Sept. 5.9 8.3 Aug. 6.1 8.9 July 6.1 9.0 June 6.0 8.3