Good news for cyclicals: Another soft landing in the works --
"Job Creation Lagged in September, U.S. Reports"
By SYLVIA NASAR
Job creation fell in September to the lowest rate
in more than two years, the Labor Department
reported Friday --
the most persuasive evidence yet that the financial
crisis abroad is slowing the booming U.S. economy.
The Labor Department said the unemployment rate edged
up only slightly, to 4.6 percent from 4.5 percent in
August. But payrolls expanded by just 69,000 jobs, a
fraction of the 309,000 jobs created in August or the
roughly 200,000 that had been expected by forecasters.
Total hours worked dipped, suggesting that production
and income were leveling out, and hourly pay barely
inched up.
The Labor Department's monthly employment report is
considered the most substantial assessment of the
economy's health. Coming on top of other signs of
weakness -- falling exports, slowing retail sales and
weaker business investment -- the data reinforced a
view among economists that the eight-year-old expansion
was being crimped by the economic problems that began
afflicting Asia last year and have since spread.
"It's a warning sign of slower economic growth ahead,"
said Steven Roach, chief economist at Morgan Stanley
Dean Witter.
Investors treated the weak jobs report not as a
warning, but as a pleasant surprise -- a green light
for further easing of interest rates by the Federal
Reserve, which cut rates Tuesday for the first time in
nearly three years in an effort to forestall an
economic downturn.
Stock prices strengthened Friday after two days of
heavy losses, and the Dow Jones industrial average rose
152.16 points, or 1.99 percent. Long-term bond yields,
a barometer of interest rate trends, fell to 4.84
percent, another in a series of 31-year lows.
The Labor Department also reported that employment
growth had been stronger in July and weaker in August
than initially reported, underscoring that the slowdown
in job growth since midsummer has been steep.
Excluding the gyrations caused by the General Motors
strikes, gains in employment shrank from 270,000 jobs
in July to 160,000 in August to the very modest
September gain.
"The revisions don't change our sense of where we are,"
said Katherine Abraham, the commissioner of the Bureau
of Labor Statistics. "But they make the decline in job
growth more marked."
A fraying at the edges of what was until recently a
vibrant labor market has already been reflected in a
retreat in consumer confidence in the last few weeks
from record highs. The University of Michigan, which
tallies a widely followed index of consumer confidence,
reported Friday that the index slipped to 100.9 in
September from 104.4 in August.
To be sure, the U.S. labor market still remains healthy
by any historical measure. The change in the overall
unemployment rate, for example, reflected a change of a
few hundredths of a percentage point that was then
magnified by rounding. Unemployment among most
demographic groups -- at the lowest levels in 25 or 30
years -- has not budged. And the percentage of
Americans working actually rebounded to a near record
of 64.1 percent.
"These are still signs of a very strong labor market,"
said Alan Krueger, a labor economist at Princeton
University. "Most people who want jobs are still able
to find them."
But the snapshot of the labor market confirmed that the
risks facing the economy have shifted toward much
slower growth, maybe even recession.
Signs of cooling in the labor market were widespread.
Factory payrolls continued to shrink in September,
dropping by 16,000 jobs and bringing the total number
of manufacturing jobs lost this year to 114,000. With
exports to Asia and Latin America plunging, imports
soaring and production flat or contracting, the makers
of electrical equipment, machinery and other industrial
products have been forced to lay off workers.
The weakness in manufacturing is likely to persist.
Orders for long-lasting goods were up over all by 0.9
percent in August, but excluding aircraft and
automobiles (which were bolstered by the end of the GM
strikes) orders declined 1.2 percent. Construction
contracted by 20,000 jobs, not just in residential
building but also in heavy construction like roads and
bridges. That is the first decline this year other than
those that reflected the vagaries of the weather and
seasonal adjustments. It is also a sharp contrast to
the average monthly gains of around 24,000.
Most striking, however, was a sharp slowdown in hiring
in the sprawling service sector, which employs more
than 80 percent of American workers. Services added
just 105,000 jobs in September, compared with the
average of 215,000 a month since the start of the year.
Particularly noteworthy was that the head count at
temporary-help suppliers, a leading indicator of future
permanent hiring, dropped sharply, by 44,000. Temporary
hiring has been zigging up and down all summer, but the
September slump was bigger.
Wage inflation seems to be cooling with the labor
market. The trend in hourly pay, which seemed to be
picking up in the first half of the year, now seems to
be leveling out or even slowing. Hourly pay was up just
4 percent from a year earlier, compared with a rise of
4.3 percent from May 1997 to May 1998.
Despite the overall pattern of cooling off, hiring did
pick up in a number of industries, including wholesale
and retail trade, computer services, management
consulting and financial services. The brightest spot:
the amusement industry, which includes theme parks,
bowling alleys, movie theaters and video parlors, all
places where Americans can leave their worries at the
door.
Copyright 1998 The New York Times Company |
