U.S. Creates Jobs at Moderate Pace in July
The number of jobs in the United States continued to increase at a respectable pace last month, despite a growing impact from the Asian economic slump and widespread layoffs from the recent General Motors Corp. strike, the government reported Friday.
The Labor Department’s monthly survey showed that the economy created 66,000 jobs in July--down from a 196,000-job rise the previous month but still well above what many analysts had predicted.
The unemployment rate remained at 4.5% of the work force.
Economists said the statistics show that while the economy, as expected, was growing somewhat more slowly as a result of the Asian slump, it was still robust. Had it not been for the strike at GM, they estimated, job growth would have reached 207,000.
Bruce Steinberg, chief economist at Merrill Lynch & Co., said the economy seemed on track for the so-called soft landing long sought by government policymakers, in which growth slows to a sustainable pace that avoids overheating--and new inflation.
“Just what the doctor ordered,” he said.
The more-buoyant-than-expected report gave Wall Street a modest boost, enabling the stock market to end the week with a third consecutive gain after Tuesday’s 299-point slide. The Dow Jones industrial average rose 20.34 points, closing at 8,598.02.
The GM strike, which began in early June, directly involved only 5,800 workers in July, but it forced layoffs of 127,800 workers in companies that depend on the auto industry for parts or business. Over the 54-day strike, layoffs totaled 150,000.
Analysts said the labor dispute, which was settled July 29, was not expected to exert a permanent drag on the economy. If anything, analysts expect a temporary “bounceback” as auto workers return to their jobs and production resumes.
Friday’s report showed job growth continuing to be strong in most sectors of the economy, though more slowly than in previous months. Employment in service-producing industries rose by 229,000 jobs; retail trade, 125,000; finance, 32,000; and construction, 18,000.
Even so, the manufacturing sector continued to contract for the fifth month in a row, partly as a result of the falloff in Asia’s demand for U.S. exports. Overall factory jobs fell by 176,000, including 111,000 in the auto industry. With the strike excluded, the decline was 35,000.
Cynthia Latta, economist at Standard & Poor’s DRI, a Massachusetts-based economic forecasting firm, said the manufacturing sector appeared to be going through a temporary slowdown, as it did in 1995, only this time the overall unemployment rate was not as high.
The 4.5% level reported for July marks the 13th month in a row that the jobless rate has remained below 5%--by far the best performance since 1973. The unemployment rate edged down to 4.3% in April and May, the lowest it had been in 28 years.
Economists traditionally have believed that if the jobless rate remained below 5.5% for very long, it would heighten pressures for sharper wage increases and eventually set off a new round of inflation. As a result, policymakers have been hoping the economy would slow.
Although wage pressures have been intensifying, Friday’s report showed that in July, at least, there may have been some respite from that trend. The average hourly earnings of production workers--a key benchmark--edged up only 0.2%, to a level 4.2% above a year ago.
Still, President Clinton, speaking at a White House ceremony, pointed out that over the last year, wage levels had risen at a rate more than double that of inflation, providing American workers with their sharpest gains in real wages in 20 years.
“We have low unemployment, low inflation, strong growth and higher wages,” the president declared. He signed into law the Workforce Investment Act, which provides for federal grants for worker education and training.
Despite the impact from the Asian slump, most analysts believe the economy will pick up speed again during late fall and early winter and settle down to a steady--and more sustainable--growth rate of between 2% and 2.5% a year.
The economy had been creating jobs at a helter-skelter pace for most of 1997 and early 1998. For the last several quarters, payroll employment has been growing by between 225,000 and 300,000 new jobs a month.
The impact from the GM strike was substantial. The jobless rate for durable-goods manufacturing plants--which includes the auto industry--soared to 4.3% in July, from 2.9% before.
The July figures showed little basic change in the jobless rates for several categories of workers who frequently have experienced higher-than-average unemployment rates, such as teenagers, women and Latinos.
For blacks, however, the jobless rate jumped to 9.7% in July, from 8.2%. But analysts say such figures are volatile and do not necessarily track the overall unemployment rate precisely.
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U.S. Unemployment
Percentage of U.S. work force not employed, seasonally adjusted:
July: 4.5%
*
Source: Labor Department
