Job Growth Slackens, Easing Inflation Fears

WASHINGTON —  The nation’s economy created far fewer jobs in September than it has during most of the past year, suggesting that the overall growth rate finally may be slowing, the Labor Department reported Friday.

Despite the slowdown in job gains, the nation’s unemployment rate remained at 4.9% of the work force--the sixth month in a row that the jobless rate has been at or below the 5% level.

The new figures marked the first time in 24 years that the unemployment rate has remained below the 5% level for half a year or more--further evidence that the 6-year-old economic recovery has fully taken root.

The Labor Department’s monthly report showed that industry payrolls rose by 215,000 in September, but three-quarters of those jobs reflected a return of striking United Parcel Service of America workers early in September.

Disregarding the settlement of the Teamsters strike against UPS, the number of new jobs created in September totaled only about 53,000--down from an average of 187,000 a month this past summer and 218,000 a month during the first half of the year.

Both economists and the financial markets took comfort in the new figures. Analysts have feared that unless the economy cooled down, inflation might intensify, prompting the Federal Reserve Board to raise interest rates.

David A. Wyss, an economist at DRI/McGraw-Hill, one of the nation’s largest forecasting firms, said the figures for new jobs suggested that the economy is “slowing down to a sustainable pace.”

On Wall Street, the Labor Department report initially sent stock prices surging, but the rally abated, and the Dow Jones industrial average ended the day at 8,038.58 points, up only 11 points from Thursday’s close.

Bond prices followed a similar pattern.

The falloff in the number of new jobs was not the only evidence in the report that the economy’s growth rate may be slowing. There also were these developments:

* Wage increases were restrained, with average hourly earnings rising by only 0.3% over the month despite an increase in the minimum wage that took effect in September. In August, hourly wages rose by 0.5%.

* The length of the average workweek also edged down to 34.5 hours, from 34.6 in August, reflecting a decline in opportunities for overtime as economic activity softened.

* The unemployment rates for groups that traditionally have had high unemployment rates--blacks, Latinos and teenagers--edged up again in September after having fallen during the previous month.

The jobless rate for blacks, for example, rose to 9.6% in September, up from 9.3% the previous month and 9.4% in July, while that for Latinos jumped to 7.6%, from 7.2% in August and 7.9% in July.

At the same time, the unemployment rate for teenagers soared to 16.7% in September, up from 16.4% in both July and August. The rise, however, was due partly to the end of the summer-job period.

Despite the slowdown in the growth of new jobs, analysts said that the economy continued to show substantial strength and that the nation was nowhere near the brink of a slump or a recession.

Earlier this year, analysts had been afraid that the economy might be growing too rapidly and that eventually it might run the risk of rekindling inflation. There already is a labor shortage in many parts of the country.

However, virtually all the key measures of wages and prices released over the last few weeks have shown that there is little if any pressure on the inflation front.

Bruce Steinberg, an economist at Merrill Lynch & Co., said the combination of figures should help relieve the Fed’s “recurring fears of overheating” and should reduce chances that it will raise interest rates any time soon.

Mainstream economists have contended that the economy is at “full employment” when the jobless rate falls to 5.3%--a level they say is the lowest that unemployment can remain without reviving inflation pressures.

Some analysts, however, have suggested that the old rule of thumb no longer applies and that the unemployment rate can be pushed lower without risking higher inflation.

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U.S. Unemployment

Percentage of U.S. work force not employed, seasonally adjusted:

September: 4.9%

Source: Labor Department