Jobless Rate Up Slightly; Easing in Growth Seen
The nation’s seemingly unstoppable job-creation machine sputtered slightly last month, the government reported Friday, but economists were divided over whether it signaled the start of the long-expected slowdown in the economy’s growth rate.
The Labor Department’s monthly survey showed that industry payrolls shrank by a modest 36,000 jobs in March, after 25 consecutive months of job growth. That nudged the overall unemployment rate to 4.7% of the work force, up from 4.6% in February.
Analysts said much of the falloff was probably a fluke, stemming from a combination of damage from the El Nino storms and from colder winter weather, which shut down construction in some areas, and most likely would be offset by job increases in coming months.
Nevertheless, economists said that even when such factors were taken into account, there still was some evidence that the last few months’ surge may be abating and that the economy may be slowing to a more sustainable, and less inflation-prone, pace.
Allen Sinai, chief economist for Primark Decision Economics, said the new figures suggest that “the economy may be moving to a slower growth-track.” But he cautioned that the March figures overstate the amount.
But Lawrence Chimerine, economist at the Economic Strategy Institute, a Washington research group, disputed any suggestion that the economy might be heading for major changes. “It doesn’t mean that the good times are over,” he said of the March statistics.
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Friday’s report also showed that the effect of the Asian financial crisis continued to be modest. While there was some weakness among U.S. manufacturing industries, the bulk of the economy remained strong.
If the slowdown in the rate of job creation proves genuine, it would ease pressure on the Federal Reserve to raise interest rates to help keep the economy from overheating and igniting new inflation pressures.
Although most analysts have been predicting for months that the economy would slow slightly from its frenetic pace of last year, the easing has proved elusive. Job growth for the last five months has averaged about 345,000 jobs each month.
Federal Reserve Board Chairman Alan Greenspan has warned that the central bank has been worried about the economy’s overheating but that it has been reluctant to raise interest rates because of uncertainty over the effect of the Asian financial crisis.
Sinai said Friday that the new batch of statistics ought to help stave off any increase in interest rates for the foreseeable future, and the nation’s financial markets agreed. Bond prices soared, while the interest rate on benchmark 30-year Treasury bonds fell to 5.84%.
The suggestion that job creation may be starting to slow slightly was reinforced by the Labor Department’s decision to revise its figure for the number of jobs created in February--reducing it to 252,000, down from an estimate of 310,000.
At the same time, the length of the average workweek in manufacturing industries fell by 0.3 hours in March to a new level of 41.7 hours. Overtime also edged down, dipping by 0.1 hours to 4.7 hours a week.
Even so, there were some signs that the labor shortage of recent months is beginning to push wages higher. Average hourly earnings of rank-and-file production workers jumped by 4 cents in March, to $12.63.
Economists pointed out that despite the slight jump in the jobless rate in March, the nation’s unemployment rate remains at about a 24-year low--well below the 5% to 5.5% level that most mainstream economists regard as full employment.
Forecasters are expecting the jobless rate to edge up to 5% or so by the end of the year, but they say most of the increase is likely to come in late summer and early autumn, after the full effect of the Asian financial crisis begins to hit.
The unusual weather patterns in February and March--created in part by the El Nino phenomenon--played havoc with the construction industry. Warm weather in February led to faster-than-normal hiring that month, while cold weather in March prompted some layoffs.
Since the Labor Department adjusts its monthly figures to compensate for seasonal variations, any major departure from the norm can leave the published figures distorted--as happened in March.
The other major decline in employment was in the retail trade sector, which lost 48,000 jobs over the month. The bulk of the losses came in the restaurant business, which analysts said has been overbuilt. Employment in apparel stores also dipped slightly.
Friday’s report left the number of Americans out of work at 6.5 million, up 136,000 from February’s level. Total employment in March stood at 131 million, down slightly from the previous month.
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Jobs Report
Unemployment
March, 1998: 4.7%
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Change in payroll jobs
Monthly increase in non-farm jobs, in thousands
March, 1998: -36,000
Source: U.S. Department of Labor
