U.S. Economy Slowing, Job Figures Indicate
Signaling that the zigzagging U.S. economy is slowing down again, the federal government said Friday that the nation’s employers added a relatively skimpy 116,000 jobs to their payrolls last month. The discouraging report overshadowed the news that the U.S. unemployment rate inched down to 5.5% in October, from 5.6% in September.
The employment reports were weaker yet for California. The state’s unemployment rate rose to 7.8% last month from 7.2% in September while the job total edged up only 5,500, less than half of the monthly average of 11,920 this year.
Many analysts said the state’s modest economic recovery this year appears to remain on track. They also noted that the state’s jobless rate was pushed up by an influx of new job hunters rather than by any new slump in a key sector of the economy.
Nationally, however, the employment reports underscored the growing signs that the economy has slowed significantly in recent weeks after surging unexpectedly in the third quarter of the year. For example, the National Assn. of Purchasing Managers said Wednesday that manufacturing also fell in October.
Also, the September job gain was revised downward to 50,000, from a previously estimated increase of 121,000.
“It doesn’t say recession to me yet, but it’s very bad news,” said Audrey Freedman, a New York labor economist.
Dean Baker, an economist with the labor-supported Economic Policy Institute, added that “nothing is plummeting, but we’re looking at a period of weaker growth, and wages that don’t keep pace with inflation.”
One of the major disappointments was the continued weakness in manufacturing. Although labor department officials blamed October’s decline of 21,000 manufacturing jobs largely on a strike by Boeing Co. aircraft workers, private analysts noted that manufacturing employment is now down by 227,000 jobs from March.
“It means that there are fewer good job opportunities for people without a college degree,” Baker said.
Still, modest gains in other industries nudged the U.S. jobless rate to its lowest level in seven months.
A bright sign for workers was that average hourly wages rose 6 cents to $11.59 in October. While many labor market analysts said that gain was far from enough to suggest that the long-term stagnation in workers’ wages and benefits is ending, it appeared to worry the inflation-sensitive bond market.
Bond prices were down in Friday trading, with 30-year Treasury bonds off about half a point. On the other hand, the Dow Jones industrial average climbed 16.98 to close at 4,825.57, setting a record high for the second consecutive day. That suggested stock market investors were focusing on the weak job gain, and concluding that the Federal Reserve Board may soon cut interest rates again to try to stimulate the economy.
Some economists who track the California job market argued that the government’s reports for the last two months have understated the state’s employment growth. They noted that the California employment estimates tend to be more volatile than the nation’s because they are derived from a smaller population sampling.
The increase of 13,800 reported for the two months “doesn’t make a whole lot of sense to us,” said Ted Gibson, principal economist for the state Department of Finance. “We think employment is doing a lot better than that.”
For instance, Gibson said, this year’s payroll tax revenues suggest that the state actually is gaining roughly 25,000 jobs a month.
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David Hensley, regional economist with Salomon Bros. in New York, pointed to a reported 2,400-job decline in non-durable manufacturing and a gain of 8,200 in government employment--two categories that have been stable--as evidence of quirks in the October statistics.
“California has been bucking the trend of a national slowdown. The underlying trend is that growth is continuing at a moderate pace,” Hensley said. At worst, he said, the October report for the state “should be viewed as a temporary setback.”
Hensley said that stabilizing home prices, rising retail sales and general improvement in such industries as motion pictures, tourism and construction should continue to push along the state’s moderate recovery. “Most sectors of the economy are stable or growing,” he said.
At the same time, he said, the lingering effects of national defense cutbacks, local government budget crises and consolidation in the finance, insurance and retail estate category continue to slow the recovery.
California, after suffering a deeper and more prolonged slump than the nation overall, has been rebounding this year. Its jobless rate, however, remains far above the national level, the legacy of the loss of thousands of aerospace and defense jobs.
The state’s jobless rate remained the highest among the 11 big states whose figures were released Friday. Next came Florida, at 6.7%, followed by New York at 6.3%. North Carolina posted the lowest unemployment rate, 3.9%.
The latest jobless report for Orange County pegged unemployment at 5.1% in September, down from 5.5% in August. Despite Orange County’s bankruptcy, the county has sustained modest job growth throughout most of this year. The county’s unemployment figure for October is due out in two weeks.
Los Angeles County’s jobless rate--which, unlike the national and state rates, is not adjusted for seasonal trends--remained at 7.5% for the second consecutive month, down from 7.8% in October, 1994.
Last month’s figures reflected estimated employment of 4.1 million while the number of unemployed in the county was put at 336,000. Over the first 10 months of 1995, the county’s jobless rate has ranged from a high of 8.9% in January to a low of 6.8% in April and May.
Vincent M. Canales, a labor market analyst with the California Employment Development Department, said the underlying job market appears to be strengthening. “We expect to see a slight improvement in the next few months,” he said.
Canales said his outlook is based on the prospects for improvement in the area’s hard-hit aerospace industry. One major Southern California contractor, McDonnell Douglas, just landed an important C-17 order from the Pentagon.
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Meanwhile, businesses such as motion pictures and various service industries, including retailing and education, are adding jobs. At the same time, he said, gains in those areas will are being offset by layoffs of county workers and job losses from the scheduled closing of the Long Beach Naval Shipyard.
The national economy, analysts said, has clearly slowed since the July-September quarter, when output shot up 4.2%. That followed a weak 1.7% second-quarter rise.
Meanwhile, consumer debt is on the rise, further raising concern about the prospects for the Christmas shopping season.
Gordon Richards, chief economist for the National Assn of Manufacturers, said Friday’s job reports were “pretty consistent” with the picture of slow growth in the economy.
However, he said the likelihood of a recession is “rather minimal.” The Federal Reserve could ease monetary policy without any fears of reigniting inflation, he said. The “economy is still performing below its potential.”
The “recent pieces of economic data, including Friday’s report, suggest that the improvement in the business climate this year “is tenuous,” said Sen. Connie Mack (R-Fla.) chairman of Congress’ Joint Economic Committee, which held its regular meeting to review the monthly unemployment report.
“We should not settle for mediocre rates of growth in the economy, family incomes or jobs,” Mack said. “Policies which reduce taxes, reduce the burdens of government, and balance the budget are absolutely essential for boosting American living standards and incomes in the future.”
Silverstein reported from Los Angeles and Rosenblatt from Washington.
