Jobs, Wages Growing at Good Pace, U.S. Reports

WASHINGTON — American employers resumed their brisk hiring pace in June, and, although the unemployment rate crept up a notch to 4.3%, the U.S. economy showed every sign of continued vigor, the government reported Friday.

Employers added 268,000 workers to their payrolls last month, the Labor Department said. That was more than analysts had expected and an abrupt turnaround from May, when employers shed 5,000 jobs.

Many of the new jobs were seasonal--in restaurants, bars and amusement parks--and many of the new workers were students on summer break.

The vigorous job market helped push average earnings up by a nickel to $13.23 an hour. Although that was the fastest pace in three months, it was smaller than the average for 1998, and that allayed analysts’ fears that inflation is coming back.

“The economy is still creating lots of jobs without a lot of wage pressure,” said Edward Yardeni, chief economist of Deutsche Morgan Grenfell in New York.

Not surprisingly, the Clinton administration, which is banking on the economy’s performance to keep a Democrat in the White House next year, called attention to the latest job report.

“The fundamentals of this economy remain strong,” Labor Secretary Alexis M. Herman said.

Investors, breathing a sigh of relief at the moderate employment and earnings growth, propelled share prices to record territory across the board.

The Dow Jones industrial average rose for a sixth straight day, gaining 72.82 points, or 0.7%, to close at 1,1139.24 and break its previous record, set in mid-May. Other major market measures also broke records.

Despite the stronger-than-expected job growth, the usually inflation-wary bond market barely reacted. Long-term bond yields closed mostly unchanged in a shortened, pre-holiday session. Analysts said inflation did not seem so serious a threat that the Federal Reserve Board, which raised interest rates Wednesday, would do so again soon.

But Wednesday’s increase was modest and accompanied by an unexpected announcement that the central bank no longer believed further increases were needed. Analysts said the combination signals that Fed policymakers believe the economy can continue to purr along in its current state indefinitely.

“The Fed seems to be telling us: ‘Have fun. This is going to continue,’ ” said Yardeni.

In addition to taking solace from the Fed action, economists found some small signs of economic cooling that will tend to ease any inflationary pressures.

For the first half of 1999, monthly job growth averaged 202,000, versus 242,000 last year and 281,000 in 1997.

“I don’t see evidence of a big slowdown, but the fact that you got any slowdown at all is favorable, given the current tightness of labor markets,” said Richard D. Rippe, chief economist at Prudential Securities in New York.

Signs of continued economic strength abounded Friday. The Commerce Department said factory orders rose 1.1% in May, reversing a 1.4% decline in April. The factory gain, the ninth in the last 12 months, was largely due to a nearly 40% increase in aircraft orders. For example, Seattle-based Boeing Co. received orders for 11 planes in May, including three 747s, with a value of nearly $1 billion, nearly double April’s total.

And the auto industry wrapped up the strongest first half in its history, on track toward shattering the sales record set in 1986. Ford Motor Co. and General Motors Corp. announced spectacular auto sales figures for June. Ford said it sold more cars than in any month in its near-century-long history.

“We believe sales will remain strong in the second half of 1999, driven by a healthy economy and confident consumers,” said Robert Rewey, Ford’s group vice president for marketing sales and services.

June’s unemployment rate was slightly higher than May’s 4.2% rate, but analysts said the difference was statistically insignificant. Unemployment has remained below a generation-low 4.5% for more than a year, a byproduct of the nation’s 8-year-old economic expansion.

There was still more evidence that the length of the expansion had helped spread its benefits to disadvantaged groups normally outside the economic mainstream.

The unemployment rate for blacks, though still almost double that for whites, slipped from a record low 7.5% in May to a new record of 7.3% last month. The rate for Latinos rose a 10th of a point to 6.8% but still remained near its three-decade low.

The one area of the job market where the good news did not penetrate was manufacturing. The government said manufacturing firms shed 35,000 more workers in June, bringing total job losses since March 1998 to almost half a million.

For most of the last two years, manufacturing job losses were traceable to the Asian financial crisis, which robbed American firms of crucial export markets. But with Asia now recovering and manufacturing orders there on the rebound, analysts said that the most recent losses were the result of productivity gains that enable companies to do more with fewer workers.

That was underscored by a slight increase in overtime worked in manufacturing in June, to the highest level since the Asian financial crisis began two years ago.

Among businesses adding workers in June were eating and drinking establishments (32,000), amusement and recreational services (20,000), movie houses (11,000) and hotels (9,000).

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The Job Market

While the unemployment rate rose slightly in June, the number of jobs created surged.

Jobless Rate

June: 4.3%

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News Jobs

June: 268,000

Source: Labor Department