Job growth down in slowing economy

September 03, 1994|By New York Times News Service

WASHINGTON -- Employment figures released yesterday provided the clearest evidence to date that the economy has slowed from last year's unsustainable pace, but that it retains enough strength to avoid braking too severely.

Job growth slackened in August as the unemployment rate, 6.1 percent, stood at essentially the same level for a fourth straight month, the Labor Department reported yesterday. The rate had fallen markedly early this year.

The data, which provide the first broad view of economic performance for the month, seemed to reduce further the chance that the Federal Reserve would raise short-term interest rates again at its policy meeting this month.

At the same time, the growth in factory and other jobs was sufficient to blunt concern that the economy might sink to an unsatisfactorily low pace of expansion, because of tighter government spending, higher taxes and higher interest rates.

Merrill Lynch called the employment figures "constructive" on the whole. The report showed a smaller-than-expected rise of 179,000 payroll jobs last month, the lowest increase since January. That rise was far below the average of 293,000 so far this year and below the 259,000 jobs created in July.

The Clinton administration, meanwhile, took the occasion to boast that 3.1 million jobs had been created since Labor Day of 1993.

"The U.S. economy continues to enjoy healthy growth in incomes and employment," Laura D'Andrea Tyson, head of the President's Council of Economic Advisers, said. Moreover, she added, "there is no sign of an intensification of inflationary pressures in today's report."

The report initially cheered the bond market, but traders looking for any hints of inflation soon found other reasons to sell.

Private analysts noted that average hourly earnings rose a skimpy 2 cents last month, cutting the annual rate of increase in the latest three months to just 1.5 percent.

"With wages falling below inflation, consumers are not going to have the discretionary buying power to give the economy much support," said Lacy H. Hunt, chief economist at HSBC Holdings Inc. in New York. The Consumer Price Index rose at a 3.3 percent compounded annual rate for the three months that ended in July.

What seems to be happening, economists and business people say, is that companies facing sharp increases in the cost of various commodities -- but unable to raise their own prices -- are stoutly holding the line on wages, their biggest expense.

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