June Jobless Rate Rises to 5% From May’s 24-Year Low
Providing clear evidence of slowing economic growth, the federal government reported Thursday that the nation’s unemployment rate crept up to 5% in June, rising from a nearly 24-year low of 4.8% the month before.
The increase, coupled with other indications that inflationary pressure is easing in what has been a red-hot economy, sparked a Wall Street rally. The Dow Jones industrial average shot up 100.43 points to a record 7,895.81 in an abbreviated pre-holiday session, and bond prices also climbed.
Employers, according to the Labor Department report, added 217,000 workers to their payrolls in June. That was slightly less than expected and down from the average monthly increase of 236,000 for the first five months of the year.
Still, that figure included a seasonally adjusted gain of 49,000 in local public school jobs, an increase that many analysts say was a statistical quirk stemming from later-than-usual summer recesses. All told, private-sector jobs rose by an unspectacular 151,000, and average hourly wages inched up a moderate 4 cents.
“The main story here is that the economy continues to move ahead, but it isn’t booming, and there’s yet to be any meaningful sign of an acceleration in inflation,” said Paul Kasriel, chief U.S. economist for Northern Trust Co., a Chicago-based bank. “The fact that the unemployment rate went up suggests that an already tight labor market is not getting tighter.”
Kurt Karl, chief economist for U.S. forecasting at the research firm WEFA Group in Eddystone, Pa., added that the 5% jobless level “is still a very low unemployment rate, and it looks as though we’re in a nice situation of rising employment, rising wages and low inflation.”
For workers, however, there were a few signals that could point to softening in the currently vigorous job market. In manufacturing, there were small declines in the number of hours worked and overtime. Temporary-help employment, which often serves as an entryway into the working world, was flat for the month and followed losses in April and May.
“There are indications that demand [for new workers] is slipping,” said Dean Baker, an economist with the organized-labor- supported Economic Policy Institute. “I don’t see any huge falloff, but I worry over time that it’ll lead to a weakening of the labor market.”
Analysts said the employment report provided after-the-fact support for the Federal Reserve Board’s decision Wednesday to leave its key short-term interest rate unchanged. They said it also could help persuade the Fed to hold off on raising rates when it next considers monetary policy on Aug. 19.
Until rising in June, the nation’s jobless rate had been on a slow decline since January, when it stood at 5.4%. In June 1996, the rate was 5.3%.
June unemployment figures for economically recovering California and other states won’t be available until later this month. In May, California’s jobless rate was 6.3%, down from 6.5% in April.
Among the major demographic groups, only adult men and whites showed significant increases in joblessness. The rates for both groups rose to 4.2%.
Unemployment rates remained flat for other major groups: adult women, 4.4%; teenagers, 16.8%; blacks, 10.4%; and Latinos, 7.6%.
The 4-cent increase in hourly wages for nonsupervisory workers matched the gain in May and brought the average to $12.22, up 3.5% from a year earlier and slightly ahead of inflation. Average weekly earnings rose to $424.03, from $421.43 in May.
Lifted by the dubious rise in local school jobs, local government employment was up 78,000. Next came the broad services sector, with a pickup of 63,000 jobs. That was down, however, from the average increases of 116,000 during the economically more robust first five months of the year.
Retail trade, bolstered particularly by hiring at restaurants and bars, climbed by 58,000.
The gain in payroll jobs for May, originally reported as 138,000, was revised upward to 166,000 in the latest report.
In a separate report, the Labor Department said first-time claims for state unemployment benefits rose 5,000 last week to a seasonally adjusted 337,000.
MARKET RALLY
The Dow industrials gain 100 points and bond yields plunge. D3
