Jobless rate hits 6-month high 4.6% in September suggests slowdown may be intensifying

October 03, 1998|By BLOOMBERG NEWS

WASHINGTON -- Unemployment rose to a six-month high of 4.6 percent in September as the U.S. economy added fewer new jobs than expected and average weekly earnings fell, the government said yesterday in a report that suggests an economic slowdown may be intensifying.

The increase from August's 4.5 percent jobless rate was accompanied by a gain of just 69,000 jobs last month as factories and builders slashed their payrolls and hiring by service companies slowed, Labor Department figures showed. That's down from a revised job gain of 309,000 in August and only about a third of the September gain economists were expecting. Average weekly earnings fell about 0.5 percent last month.

The slowdown in job growth "may be a defining moment for the economy" because the sluggishness was so broad-based, said William Sullivan, an economist at Morgan Stanley Dean Witter in New York.

Still, the government's September statistics may have overstated the job growth weakness because of a shorter than usual sample week, some analysts said. The Bureau of Labor Statistics collected data during the week that ended Sept. 12, which included the Labor Day holiday, when many businesses and most government offices and schools were closed.

With the unemployment rate still close to a three-decade low, "the rest of the world has the Asian flu and the U.S. has the sniffles," said David Wyss, an economist at Standard & Poor's DRI in Lexington, Mass.

September's gain was the weakest since a drop of 48,000 jobs in January 1996, when a blizzard crippled the Atlantic seaboard and a budget crisis shuttered federal government offices. And the jobless rate is now the highest since March, when it was 4.7 percent. Unemployment fell to a 28-year low of 4.3 percent in April and May, and has been rising since.

"The U.S. economy is clearly slowing," said Bruce Steinberg, chief economist at Merrill Lynch & Co. in New York. Slower job growth "points to a slowdown in income growth and, therefore, consumer spending," he said.

Steinberg forecast that the economy will expand at a 1.5 percent rate next year. That would be less than half last year's 3.9 percent growth rate and the weakest annual showing since the economy contracted by 0.9 percent in the recession year of 1991.

Other reports yesterday:

The University of Michigan's index of consumer sentiment weakened in late September, falling to 100.9 from 104.4 in August. Consumer attitudes are regarded as indicators of consumer spending, which accounts for about two-thirds of U.S. economic activity. When confidence falls, spending often slows.

And new orders to U.S. manufacturers grew at a slower pace in August than a month earlier, rising 0.9 percent after climbing 1.1 percent during July, Commerce Department figures showed.

Service companies accounted for all of September's job growth, and that's mostly been the case for the last six months. Service-producing employment rose by 105,000 in September, the report showed. Still, that's less than half the 215,000 monthly average so far this year for that category.

Manufacturing employment fell by 16,000 last month -- the sixth monthly decline this year. Overall, factories have shed 114,000 jobs since the first of the year.

Workers' average hourly earnings, a gauge of business costs, rose 0.1 percent -- or 1 cent -- to $12.86 in September after an increase of 0.5 percent in August. Average weekly hours worked fell to 34.4 in September from 34.6 during August.

Pub Date: 10/03/98

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