Econ--The Post: "Economy Shows Signs of Slowdown"
washingtonpost.com
>>> By John M. Berry
Washington Post Staff Writer
Friday , July 7, 2000
The nation's jobless rate dipped to 4 percent last month, but the Labor Department said today that only 11,000 workers were added to private and government payrolls, a number that analysts said was well below what was expected and consistent with a slower pace to U.S. economic growth.
After a weak employment report for May, when private payroll jobs fell by 165,000, the expectation was for a big rebound. Private payrolls did increase by 206,000 last month, but 190,000 Census Bureau workers completed their task of knocking on doors to count people as part of the decennial census and were laid off.
However, labor markets remain very tight across the country. Many employers have been unable to fill job vacancies, particularly for entry-level workers, including those for temporary summer help. As a result, the normally very high unemployment rate for teens fell last month by nearly a percentage point to 11.6 percent, the lowest level in more than 30 years.
The overall unemployment rate has now been below 5 percent for three years and below 6 percent for just shy of 6 years.
Maury Harris, chief economist at PaineWebber in New York, said the latest payroll data suggest that the gross domestic product rose at about a 3 percent annual rate, after adjustment for inflation, in the second quarter. In contrast, GDP increased at a strong 5.5 percent pace in the first quarter and a blistering 7.3 percent rate in the fourth quarter of last year. Harris and other analysts said the labor market news coupled with other recent data, such as weak retail sales figures, may convince Federal Reserve officials they do not need to raise their 6.5 percent target for overnight interest rates when they meet Aug. 22. In order to keep the economy from overheating and head off a rise in inflation, the policymakers raised the target by a cumulative 1.75 percentage points beginning in June 1999, but left it unchanged at a meeting last week.
That possibility gave both stock and bond prices a boost. Shortly after noon, the Dow Jones industrial average was up 1.28 percent at 10,617 and the Nasdaq composite index up 2 percent to 4,040.
"These data taken along with other figures suggest that the Fed may be able to keep policy unchanged at the August meeting," said Ray Stone of Stone & McCarthy, a financial markets research firm. However, it is important to note that the July employment data available before the meeting could reveal measurably more strength in private sector payrolls than in recent months.'
The recently volatile month-to-month changes in payrolls have forced analysts to try to make sense of the ups and downs by focusing on quarterly changes, which also give unmistakeable indications of slower growth.
For example, private and government payrolls together rose an average of 197,000 per month in the April-June period, down from 324,000 in the first quarter and 258,000 in the final three months of 1999. In the private sector alone, gains fell from 246,000 monthly in the first quarter to only 108,000 in the last three months.
Another weak month would kill an August rate hike and would drastically reduce the chance of any further rate hikes at all,' said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, N.Y.
The Labor report also said that average hourly wages of production and non-supervisory employees on private sector payrolls rose a nickel an hour last month to $13.71, a moderate 3.6 percent more than in June 1999. That news will also weigh toward the Fed leaving rates unchanged next month, analysts said.
Employment gains have clearly moderated and wage inflation is still astoundingly restrained,' said economist Ed Hyman of International Strategy & Investment, a New York investment firm. Hyman also noted that total hours worked in the April-June period increased at only a 1.3 percent rate, the slowest in four years.
While the jobless rate among teens fell noticeably, rates for most other demographic groups were little changed last month. The rate for adult women was unchanged at 3.8 percent and that for adult men declined to 3.2 percent from 3.4 percent. Among whites, the rate ticked down to 3.4 percent from 3.5 percent, and it fell for blacks to 7.9 percent from 8 percent. The rate for persons of Hispanic origin also declined, to 5.6 percent from 5.8 percent.
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