U.S. job growth slows report slips out early

Investors caught off guard by bureaucratic error

Unemployment holds at 4.6%

The economy

November 06, 1998|By BLOOMBERG NEWS

WASHINGTON -- U.S. companies added fewer jobs than expected in October and the unemployment rate held at 4.6 percent, as the Labor Department caught investors off guard yesterday by mistakenly releasing its employment report a day early on the Internet.

Last month's increase of 116,000 jobs was the smallest gain in seven months and fell short of analysts' forecasts of a gain of 180,000. A revision to September's employment figures showed the economy added 157,000 jobs that month, more than twice the 69,000 previously reported.

The jobs report "caught everybody by surprise," in both its early release and in its tone, said Kevin Flanagan, an economist at Morgan Stanley Dean Witter in New York. "It's the kind of report that will keep alive the notion the Federal Reserve could lower interest rates again this year."

Investors were not so sure. Bonds rallied for a time on expectations that the economy might be slowing more than thought, which could push Federal Reserve policy-makers to cut interest rates for a third time since the end of September. The rally halted, though, after Fed Chairman Alan Greenspan said the risk of buying corporate bonds had lessened, casting some doubt on further rate cuts.

"It is, of course, plausible that the current episode of investor fright will dissipate, and yield spreads and liquidity premiums will soon fall into more normal ranges," Greenspan said in a speech broadcast by satellite to the Securities Industries Association meeting in Boca Raton, Fla. "Indeed, we are already seeing significant signs of some reversals," he said.

Greenspan's comments did not suggest that he saw an end to the risk aversion in credit markets that led the Fed to cut the overnight bank lending rate by half a percentage point in two steps. And, while spreads between the yields on corporate bonds and comparable Treasury securities have narrowed somewhat, they are still high by historical standards, which means they are above the level Fed policy-makers would like to see.

Beyond his brief comments on credit market conditions, Greenspan did not discuss the current state of the U.S. economy or Fed interest-rate policy. Fed policy-makers meet again Nov. 17.

The Treasury's benchmark 30-year bond fell three-eighths, pushing up its yield to 5.35 percent. Stocks gained for the sixth time in seven days. The Dow Jones industrial average rose 132 points, or 1.51 percent, to close at 8,915.47.

The Labor Department released the October jobs report a day early after one chart detailing changes in employment by industry was inadvertently posted on the Internet. Labor Department officials said they would investigate why the information was released.

Department officials were contrite about the error. "It is obviously unacceptable for this to have happened, and we are, as you can imagine, in the process of reviewing how this happened and taking steps to make sure it will not happen again," said Katharine Abraham, commissioner of the Bureau of Labor Statistics, which handles the report.

Manufacturing employment fell 52,000 in October, bringing to 198,000 the number of factory jobs lost since March, the Labor Department said.

Weakness persists in manufacturing and financial services, in part reflecting a drop in exports, falling commodity prices -- and turbulence in financial markets, analysts said.

Construction employment rebounded, gaining 19,000 jobs in October after losing 21,000 a month earlier. Service-producing employment rose 154,000 in October after gaining 189,000 in September.

Workers' average hourly earnings, a gauge of business costs, rose 0.1 percent -- or 1 cent -- to $12.88 in October after an increase of 0.2 percent in September.

Average weekly earnings increased to $445.65 during October from $442.73 during September.

Pub Date: 11/06/98

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