Jobless Rate Hits 5.4%, Highest in 4 Months

WASHINGTON —  The nation’s economy slowed during November, driving the unemployment rate up to 5.4%, the highest level in four months, the Labor Department reported Friday.

But the business expansion continues well into its sixth year, although at a less robust rate than before, and experts continue to foresee steady growth.

The economy is “growing at a moderate pace,” said Lyle Gramley, chief economist at the Mortgage Bankers Assn. and a former Federal Reserve Board member. “There are no major weaknesses, and I do not see any precursors of a recession.”

The number of private payroll jobs rose by 118,000 last month, below economists’ expectations and not quite enough to keep pace with growth in the ranks of people working or looking for jobs. Because the labor force grew faster, climbing by 244,000, the unemployment rate increased, climbing from 5.2% during October.

The report, by suggesting negligible evidence of inflationary pressures, was seen as welcome news for both businesses and consumers, and thus it helped soften a sharp decline in stock prices triggered by comments from Fed Chairman Alan Greenspan that the markets were rife with “irrational exuberance.” The jobs report also helped reverse a sharp rise in bond yields, as the yield on the benchmark 30-year Treasury--which had been as high as 6.64% earlier in the day--ended at only 6.51%, up from 6.50% late Thursday.

“I am not terribly worried about inflation at this point with this slow an economy,” said Martin Regalia, chief economist at the U.S. Chamber of Commerce. The overall outlook is “for continued growth,” he said.

The Fed, which raises interest rates when it fears the economy is verging on serious inflation, can relax, according to Regalia.

At the Fed’s next policy meeting later this month, “they will leave well enough alone and will be happy to leave well enough alone in the first part of next year,” he predicted.

The jobless rate has been moving in a narrow range in recent months after falling to 5.1% during August, the lowest point in seven years. It rose to 5.2% in September, where it remained in October.

The biggest category of employment growth last month was health services, which added 32,000 jobs. Finance, insurance and real estate employment expanded, along with retail trade. Private schools and colleges also added workers.

Construction employment continues to enjoy a “recent pattern of slow but steady growth,” having added 14,000 jobs last month, the Labor Department reported.

The Clinton administration is pleased with the fresh evidence of “steady, sustainable job growth,” said Labor Secretary Robert Reich, noting that 10.9 million new jobs have been created since President Clinton took office in January 1993.

“Trends bode well for working Americans,” Reich said. “The challenge is to keep this train on track and add more passengers.”

The job growth figures illustrate how the economy’s momentum has eased after a strong spring and summer. Employment gains averaged 152,000 monthly in the last three months, compared with 207,000 for the first eight months of the year.

Although many business executives had feared a resurgence of inflation, the job surge that lasted through the summer was accompanied by stable wages and prices. Previously, many economists subscribed to the notion of a 6% “natural” unemployment rate, which held that lower rates of unemployment would trigger inflation. But that belief has been somewhat discredited by the economy’s performance this year.

Now, economists express hope that job growth will continue and see scant signs of an inflationary threat on the horizon.

Average earnings were $11.99 an hour in November, an increase of 9 cents. The jump should not be viewed with alarm, however, because “monthly movements in earnings can be quite erratic,” said Katherine G. Abraham, commissioner of labor statistics. A similar monthly increase in June stirred inflation worries but had no lasting impact in later months. For the year through November, earnings have climbed a manageable 3.5%.

There were 127.6 million Americans at work last month; 7.2 million were unemployed.

The unemployment rate among adult men was 4.5%, up from 4.2%; adult women, 4.8%, up from 4.2%; whites 4.6%, up from 4.2%; blacks, 10.6%, down from 10.8%, and Latinos, 8.3%, up from 8%.

* DOW FALLS: Stocks plunge but pick up by day’s end. A1

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As the Economy Winds Down...

Increased unemployment and a slower-than-expected increase in U.S. consumer borrowing were reported Friday, indicating a slowing economy. The reports helped stop a dive among markets worldwide after comments by Federal Reserve Board Chairman Alan Greenspan that there may be “irrational exuberance” in stock prices.

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UNEMPLOYMENT RATE

November 1996: 5.4%

CONSUMER DEBT

October 1996: $1.18

The bull market this year has remained strong in part because of confidence that inflation is under control and the economy is expanding moderately. But Greenspan’s comment added confusion because he indicated that the bull market may be becoming inflationary. Major U.S. and foreign indexes, percentage change for the year:

Dow Industrials: 24.7%

Nasdaq composite: 22.4

S&P; 500: 20.1

Wilshire 5,000: 18.6

Russell 2,000: 12.6

Hong Kong (Hang Seng): 30.1

Germany (DAX): 23.9

Canada (TSES-300): 23.3

Britain (FTSE-100): 7.4

Japan (Nikkei): 2.1

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Sources: Labor Department, Bloomberg Business News