Robust economy caps 1994 with surge in jobs

January 07, 1995|By New York Times News Service

WASHINGTON -- A surprisingly robust U.S. economy ended the year by generating more than a quarter-million new jobs in December, making the 1994 gain in employment the greatest in a decade, the government reported yesterday.

The unemployment rate slipped to 5.4 percent last month, the lowest level since July 1990 and comparable with levels not common since the early 1970s.

Economists said the latest job figures, which provided the first broad look at the economy's performance last month, showed strength that would probably carry well into 1995.

By midyear, most expect the economy to be slowed by the cumulative effects of the step-by-step interest rate increases begun by the Federal Reserve last February.

And with the latest indication of the underlying force of the economy, it seems all the more likely that the Fed will raise short-term interest rates again within a month, probably by at least half a percentage point.

"Vroom!" said John R. Williams, an economist at Bankers Trust Research in New York. "That sound of high-speed acceleration sums up the U.S. economic engine as the Federal Reserve diligently pumps the brakes."

The Clinton administration moved quickly to trumpet the latest jobs report. "We have grown the private economy as we have cut government," President Clinton declared at a White House photo session. "That's a real recovery and a real bargain for the American people."

For the year, the economy added about 3.5 million jobs, a million more than in 1993. It was the largest annual increase in jobs since 1984.

Unemployment fell broadly across the nation in December. The jobless rate in California, one of the last states to emerge from recession, eased to 7.4 percent from 7.7 percent in the previous month. Among the 11 most populous states, North Carolina had the lowest jobless rate, at 3.3 percent, while unemployment in Texas rose to 6 percent from 5.5 percent.

December jobless figures for Maryland are not available yet. In November, Maryland's unemployment rate eased to 4.9 percent from 5 percent in October, the state Department of Economic and Employment Development reported yesterday.

While the 256,000 U.S. payroll jobs added in December represented a very healthy increase, what was even more impressive was a huge revision upward in the figures for November, to 488,000. That gave November the largest monthly increase in seven years. Originally, the Labor Department reported that 350,000 people were added to nonfarm payrolls in November.

Another indication of the growing competitiveness of American industry was a broadly based jump of 54,000 manufacturing jobs. That lifted the gain in factory jobs for the year to nearly 300,000.

Despite the big back-to-back monthly increases in jobs, the bond market registered little concern yesterday about whether the surge implied that higher inflation was just around the corner.

Indeed, after an early decline, bonds rallied and finished the day with modest gains, pulling down interest rates. Stock prices also climbed, paced by the industries most sensitive to the business cycle and by technology issues.

The figures released yesterday included almost no sign of the widely anticipated slowdown of the economy from an annual pace that may have hit more than 5 percent for the final three months of 1994. For the year, growth in output is now all but certain to exceed 4 percent.

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