Job Growth, Manufacturing Slow in June on Asian Woes

The great American job-creation machine shifted into lower gear in June, the government reported Thursday, as the impact of the Asian economic slump led to fewer new jobs and a slight uptick in the nation’s unemployment rate.

Thanks largely to a falloff in U.S. exports to Asia, payrolls grew by only 205,000 jobs--a respectable enough rise, but well short of the revised 309,000 increase recorded in May. As a result, the unemployment rate rose to 4.5% of the work force, from 4.3% the month before.

The deterioration was concentrated in the manufacturing sector, which has been weakening for several months, hit both by the falloff in U.S. export orders and by a pause in domestic orders as retailers try to work off large inventories they built up earlier this year.

The department said its monthly job survey was taken too early to show much impact from the General Motors strike, which cost only 9,400 jobs in June. But it said the impact was likely to be greater in July.

Analysts were unruffled by the falloff in the number of new jobs created. Most analysts, including policy makers at the Federal Reserve Board, have wanted the economy to slow somewhat to avoid overheating--a situation they fear would bring on a new round of inflation.

Katharine G. Abraham, the commissioner of labor statistics, noted that even at 4.5%, the unemployment rate was “still quite low by recent standards” and well below the 5.5% level that most economists have regarded as full employment in recent years.

Moreover, despite the weakness in manufacturing, employment in the service sector continued its strong growth, increasing by 136,000 jobs over the month, while employment in retail trade grew by 53,000. Financial services jobs grew by 30,000, and construction gained 20,000.

Nevertheless, the decline in manufacturing was widespread, with payrolls falling by 29,000 jobs, the fourth such dip in five months. As expected, the steepest declines were in industries affected by the Asian slump--electronic components, aircraft and food products.

Moreover, the Commerce Department reported separately that new factory orders fell 1.6% in May--the first such decline since February and the largest monthly drop since a 2.6% dip last December. By contrast, factory orders increased during April by 0.7%, revised figures showed.

Lynn Reaser, an economist for NationsBank, said the major question in the months ahead will be whether the decline in manufacturing “is going to drag down other areas of the economy” or whether “they instead will absorb that decline.”

She said the answer will depend on how much, if any, the economic slump in Asia worsens and on how much momentum the rest of the U.S. economy maintains.

As has been the case for most of the last few years--to the astonishment of many economists--Thursday’s report showed that wage pressures remained slight, despite continued tightness in the labor market.

The average hourly earnings of rank-and-file production workers edged up only a penny during June to $12.74, the department reported. That is 4.1% above the level of a year ago. The length of the average factory workweek continued unchanged at 41.8 hours.

The falloff in job growth had been widely expected by the financial markets, which reacted only modestly to Thursday’s report. The Dow Jones industrial average fell 23.41 points to close at 9,025.26. The price of the benchmark 30-year Treasury bond rose by almost half a point.

The rise in the overall jobless rate during June showed commensurate increases for several categories of workers who frequently have had higher-than-average unemployment rates. The figures often are volatile and do not necessarily track the overall rate precisely.

The unemployment rate for teenagers rose to 14.6% in June, up from 14.2% the previous month, while the rate for Latinos jumped to 7.6%, from 6.8% in May. The jobless rate for African Americans, however, plunged to 8.2% in June, from 9% in May.

New figures published Thursday also showed that, because of the widening GM strike, the number of persons seeking unemployment benefits for the first time surged by 24,000 last week to a seasonally adjusted 390,000, the highest weekly level since March 1996.

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Factory Orders

Seasonally adjusted total new orders, in billions of dollars:

May 1998: $333

Source: Commerce Department