Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, September 2, 1995 TAG: 9509050046
SECTION: BUSINESS PAGE: A-4 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
Just in time for Labor Day, the nation's jobless rate dipped to 5.6 percent in August with factories reporting a modest employment rebound and many service industries showing sizable job gains.
However, the government's chief forecasting gauge and a privately compiled economic index both slipped, indicating bumps in the road back to healthy growth. A third government report showed construction up 2 percent in July, the best increase in two years.
Taken together, according to analysts, Friday's reports portray an economy shaking off the sluggishness of the April-June quarter and returning to a solid, albeit unspectacular, rate of growth for the rest of the year.
``The economy looks like it's operating at just the right pace,'' said economist Mark Zandi of Regional Financial Associates in West Chester, Pa. ``It's not too hot, which would result in inflationary pressures developing, and its not too cold, which would result in rising unemployment.''
Stock and bond markets faltered a bit after the Labor Department issued the unemployment report, taking it as a sign the Federal Reserve will be less likely to stimulate the economy by cutting interest rates at its Sept. 26 meeting.
However, markets recovered after
The National Association of Purchasing Management said its manufacturing index fell to 46.9 in August from 50.5 in July. Also, the Commerce Department said its Index of Leading Indicators declined 0.2 percent in July, the fifth drop in six months and a reversal of an identical June increase.
The Dow Jones average of 30 industrial stocks closed at 4,647.54, up 36.98. Bond prices also rose, pushing interest rates down. The yield on Treasury's 30-year bond fell to 6.61 percent from 6.65 percent.
Analysts said the mix of positive and negative data means the Federal Reserve still has leeway to cut interest rates, but will probably wait until later in the year.
After doubling the rate banks charge each other for overnight loans over a one-year span, the central bank lowered the rate in July for the first time in nearly three years.
``Now I think they're going to sit on their hands and wait,'' said economist Sung Won Sohn of Norwest Corp. in Minneapolis.
The Labor Department reported last month's unemployment rate was down from a seasonally adjusted 5.7 percent in July. Indeed, despite a second-quarter slump that slowed overall economic growth to an anemic 1.1 percent, the jobless rate has shown little change since the start of the year, fluctuating between 5.4 percent and 5.8 percent.
In August, non-farm businesses added 249,000 jobs to their payrolls, nearly 100,000 more than economists had predicted. That followed scant growth of 6,000 (revised from 55,000) in July.
``This is good news for Labor Day,'' said Labor Secretary Robert Reich. ``It's certainly not the extraordinary job growth of 1994 ... but it is solid job growth.''
Service industries in August were responsible for 144,000 new jobs, more than half the total growth. Particular strength was registered in business supply services, computer services and mortgage banking, which is enjoying an employment spurt caused by lower interest rates.
Jobs increased by 12,000 at factories, after an 88,000 drop the month before and smaller declines in April, May and June. Makers of electronic equipment and industrial machinery reported gains.
Employment grew by 74,000 in government, with about half of the increase reflecting a growing tendency for schools to open in August rather than September. Federal employment, however, continued to fall, edging down by 3,000 jobs.
Construction employment rose by 2,000 and analysts expect further gains in the months ahead as home-building and commercial construction revive in response to lower mortgage rates.
Retail employment was little changed after two months of strong growth.
Meanwhile
The average workweek edged down to 34.4 hours, down from 34.6 hours in July. Just at factories, though, the workweek rose to 41.5 hours from 41.3 hours and overtime inched to 4.4 hours, from 4.3 hours.
Wage rates fell by 2 cents an hour in August after increasing by 6 cents in each of the previous two months.
Economists predict modest employment growth in the months ahead, but not enough to appreciably tighten labor markets and fuel inflation.
``Employment will continue to grow but not very rapidly,'' economist Bruce Steinberg of Merrill Lynch said. ``But I don't think the unemployment rate will decline further. If anything, it might tend to rise.''
by CNB