Econ--John Berry, The Post:" Unemployment Rate Holds Steady at 4.0%"
washingtonpost.com
>>>By John M. Berry
Washington Post Staff Writer
Friday , August 4, 2000
The number of American workers on private employers' payrolls rose last month by only 138,000, well below the average for the first six months of the year, while the nation's unemployment rate was unchanged at 4 percent, about its level since last October, the Labor Department reported this morning.
The unexpectedly small rise in private payrolls – they increased an average of only 63,000 a month in the May-July period, down from a 246,000 average in the first three months of the year – was further evidence that U.S. economic growth has slowed from its heady pace around the turn of the year, analysts said.
As a consequence, the Federal Reserve was seen as likely to leave its target for overnight interest rates unchanged at a policymaking session Aug. 22, several said.
"These data corroborate the other signs of economic slowing in recent months," said Dana Saporta an analyst at Stone & McCarthy, a financial markets research firm. "It remains to be seen how much of a rebound [in growth] we shall see going forward. Judging from their public statements, and in light of the latest economic data, Fed officials seem content to keep policy on hold through the upcoming meeting."
Bruce Steinberg, chief economist at Merrill Lynch & Co., was positively ebullient.
"The July employment report was nearly perfect," Steinberg told his firm's clients. "Growth has moderated, productivity is awesome and labor market strains are easing. The report reinforces our belief that the Fed is finished tightening."
While there seemed to be a growing consensus that central bank officials would not raise interest rates this month – they have done so six times in just over a year – many analysts are less certain than Steinberg that the Fed won't act again in coming months if growth rebounds. The officials have wanted to slow growth to prevent the jobless rate from falling further and perhaps triggering a wave of inflationary wage increases.
Last week's report from the Commerce Department that the economy grew at a 5.2 percent pace in the second quarter, well above what Fed officials believe can be sustained without causing labor markets to become tighter still, suggested to some analysts that the policymakers might want to raise rates again by a quarter-percentage point as a sort of "insurance" action to help slow growth. That might still turn out to be the case, but today's report makes that much less likely.
Average hourly wages for production and non-supervisory workers rose 0.4 percent last month and 3.7 percent in the past 12 months, the report said.
Economist Nancy Lazar of International Strategy and Investment in New York said those figures indicate that "wages are not accelerating" and with employment increases slowing, "obviously, the odds of tightening by the Fed in August just went down even more."
Total payroll employment actually fell by 108,000 last month as 290,000 temporary workers hired to help conduct the decennial U.S. census were let go. Other government employment rose by 44,000, mostly at the state and local level.
Aside from the overall weakness in the numbers, some details also pointed to an easing of the demand for labor.
Katharine G. Abraham, commissioner of labor statistics, said "The number of employees on payrolls of temporary help agencies dropped by 7,000 last month after averaging an increase of 15,000 a month in the first half of the year. With last month's decline, the increase for the year to date is less than half the average monthly gain for all of 1999."
Many analysts regard changes in payroll employment at temp agencies as a leading indicator for the entire labor market, since they provide a way for employers to increase or cutback their work forces without affecting their regular employees.
On the other hand, temporary summer shutdowns in some industries, such as in the industrial machinery and furniture industries, idled fewer people than usual this year, causing a seasonally adjusted increase of 46,000 in the number of manufacturing payroll jobs, Abraham said.
Total civilian employment fell last month by 430,000, to a level of 134.7 million, partly because of the loss of Census jobs. But the unemployment rate did not rise because many of the workers who had taken jobs with the Census Bureau did not remain in the work force.
Over the last 12 months, the civilian labor force has grown by about 1 percent, roughly in line with the growth of the population 16 years of age or older. During that same period, the economy has increased its output of goods and services by about 6 percent. That has been possible because of exceptionally strong growth of the labor productivity – the amount of goods and services produced for each hour worked – to which Merrill Lynch's Steinberg referred.
The number of persons officially unemployed – -those who actively looked for work but were unable to find it – rose slightly last month to 5.65 million from 5.58 million. However, the number who did not actively look for work but said they wanted a job rose somewhat more, so that the so-called pool of available workers increased to 10.1 million from 9.8 million in June.
This measure, which is closely followed by Fed Chairman Alan Greenspan, is, like the unemployment rate, little changed from its level of last fall.
Except for teenagers, whose jobless rate rose to 13.4 percent from 11.6 percent in June, unemployment among other demographic groups was little changed. The rate among whites ticked up to 3.5 percent, fell a bit more for blacks to 7.7 percent, and was unchanged at 5.6 percent for persons of Hispanic origin.
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