Strong Jobs Report Sends Bond Yields Soaring
Suggesting that the U.S. economy is settling into a pattern of faster growth, the federal government reported Friday that employers added a higher-than-expected 140,000 jobs to their payrolls last month despite a punishing 17-day strike at General Motors Corp.
The job figures, which also showed the unemployment rate inching up to 5.6% in March from 5.5% in February, triggered a sharp bond sell-off in a Wall Street trading session shortened for the holiday weekend.
On its face, the gain of 140,000 jobs represents only a run-of-the-mill advance. But many analysts foresaw an increase of less than half that size, noting the thousands of workers idled by the GM strike last month.
Many forecasters also expected the job growth figures to taper off severely after posting an extraordinary jump in February, an economic signal that sparked a 171-point drop in the Dow Jones industrial average. The February increase, originally reported as 705,000, was revised downward to 624,000 on Friday--but still marked the biggest one-month leap in 12 1/2 years. In contrast, during blizzard-plagued January the nation lost 146,000 jobs.
Consequently, the surprise in Friday’s figures was the added evidence that “the slower growth we were seeing over the last year seems to be over,” said David A. Wyss, research director for the consulting firm DRI/McGraw-Hill. “The economy seems to be accelerating.”
Still, Wyss and other analysts scoffed at the notion that scared the bond market--that the economy is looking so strong that the Federal Reserve Board will try to tame it by boosting interest rates.
“I don’t see a lot of basis for concern that the economy is overheating,” said Dean Baker, an economist with the liberal think tank Economic Policy Institute.
He noted that the nation has added an average of 206,000 jobs a month so far this year, versus 146,000 a month in 1995 and 290,000 in 1994. Compared to last year’s modest job growth, this year “there’s not a lot of difference,” Baker said.
Speaking for the Clinton administration, Labor Secretary Robert B. Reich called the employment reports “reassuring.”
Reich said that while employment growth is picking up, “we have absolutely no evidence of inflation accelerating. This marks the 19th consecutive month of unemployment below 6%, and the 18th consecutive month that unemployment has been in the range of 5.4% to 5.7%, so those people who two years ago were sure that the natural rate of unemployment was 6% today are busy engorging their hats.
“The Goldilocks recovery continues,” Reich added. “Not too hot to cause inflation and not too cold to threaten a recession.”
On the other hand, Reich said that unemployment remains too high both in California and in the Northeast. He noted too that wage gains have been modest.
The March report showed that private-sector workers’ average hourly earnings rose three cents last month to $11.68, up 3% from a year ago.
Among the troubling signs in Friday’s report, unemployment among blacks jumped to 11.1%, up from 10.3% in February, and among Latinos, it edged up to 10%, from 9.7%. Among whites, joblessness edged down to 4.8%, from 4.9% in February.
Baker also noted that a relatively low number of unemployed workers quit their last jobs voluntarily. He theorized that the reason is that “there’s a lot of job insecurity. People are not feeling they can quit their job and find another one.”
March’s 140,000-job increase came mainly from the service industries, including health care, recreation, motion pictures and engineering. On the other hand, manufacturing lost 62,000 jobs in March, although more than half of that total was blamed on the recently settled GM strike. Construction suffered a loss of 13,000.
The rise in the jobless rate to 5.6%, which is calculated from a separate economic survey, stemmed mainly from a sharp increase in the number of people looking for work. While labor economist Audrey Freedman called it “a sign of optimism” among job seekers that employment prospects are improving, other analysts suggested that the labor force increase was a one-month aberration.
