The nation's 4.1 percent unemployment rate, the lowest in nearly three decades, was unchanged last month as hefty productivity gains allowed strong economic growth to continue without adding to inflation, the Labor Department reported yesterday.
Employers added 234,000 payroll jobs, mostly in the services sector and construction, while average hourly earnings rose only 0.1 percent.
The evidence of strong growth based on productivity gains and no hint of inflationary pressure from wages triggered rallies in both the stock and bond markets. The Dow Jones industrial average rose 247.12 points yesterday to close at 11,286.18, and in a less exuberant rally the price of a 30-year U.S. Treasury bond rose $8.12 1/2 per $1,000 in face value.
Analysts said the markets were happy because the lack of any hint of inflation flowing from the low unemployment rate suggested that the Federal Reserve will be less likely to raise short-term interest rates in coming months.
The report was greeted with great fanfare at the White House because November's rise in payroll jobs pushed total job creation since President Clinton took office in January 1993 past the 20 million mark. In his nearly seven years in office, payroll employment has increased by nearly 3 million a year to 129.5 million and the jobless rate has dropped from 7.3 percent to 4.1 percent.
"We are in the midst of the longest peacetime economic expansion in American history," Clinton said. "If, as seems highly likely, it goes on through February, it will become the longest economic expansion in our history.
"It has given us low inflation, the lowest unemployment rate in 30 years, also the lowest welfare rolls in 30 years, the lowest poverty rates in 20 years, the highest homeownership ever recorded, the lowest African American and Hispanic unemployment rates ever recorded . . . and the lowest unemployment rate among women in 40 years."
Referring to a separate joint report compiled by the president's Council of Economic Advisers and the Labor Department on the 20 million increase in jobs, Clinton said that "over 80 percent of them are in job categories that pay above the median wage. They are mostly full time, not part time. In fact, the proportion of Americans in part-time work has actually fallen a bit in the last few years."
"The report finally should put to rest the old myths about the new economy. The 20 million new jobs we have created mostly are high-wage, not low-wage jobs," he said.
In an interview, Labor Secretary Alexis M. Herman stressed, "It's not just the quantity of jobs, it's the quality. These are good-paying jobs."
Even though most of those jobs have been created in the services sector, in which wages are lower than in other parts of the economy, the services jobs have been going disproportionately to managers and professions, Herman said. At the same time, tight labor markets have given a boost to wages at the bottom of the pay scale.
"It's striking that the bottom 10 percent [in income distribution] are gaining now at a rate that is comparable to the top. We've not seen that before," she said.
Almost every part of the nation has benefited from the huge increase in jobs, according to the joint CEA-Labor report. Since January 1993 the jobless rate has declined in every state except Hawaii, where in October it was 5.3 percent compared with 4.6 percent in '93. The largest drop in terms of percentage points was in Massachusetts where the rate has fallen to 3.2 percent from 8.6 percent.
Nearly 2 million of the total increase in jobs has occurred in California, with Texas close behind with a gain of 1.9 million. The only state to lose jobs is Hawaii, where they are down by 8,500.
The District lost 57,500 jobs over the same period, a far worse performance than for any state but not necessarily worse than in some other urban labor markets. However, the District's population and labor force have declined so much that even with the large drop in the number of jobs the unemployment rate was 5.9 percent in October, down from 8.6 percent in January 1993.
According to the report on last month's national labor market situation, payrolls have increased at an average of about 200,000 a month over the past three months, down from a 262,000 average for the prior three months. But even 200,000 is faster than the rate at which the labor force is growing, implying that unless some further slowing occurs, the jobless rate will continue to fall.
If that happens, the Federal Reserve likely would raise short-term rates again early next year, a number of analysts said.
"Job growth is gradually moderating but needs to slow further to keep the Fed happy," said Bruce Steinberg, chief economist for Merrill Lynch & Co. in New York. "We look for another Fed tightening at either the Feb. 2 or March 21 [policymaking] meeting."
Steinberg and some other economists said that labor shortages may be limiting monthly payroll job gains, particularly in retailing.
"Retail payrolls edged up just 1,000 in November," he said. "That is a sign that retailers had a hard time finding willing workers for the holiday season. But such jobs are among the lowest paying in America. Employers in other industries seemed to find the workers they needed."
Actually, retail payrolls rose substantially last month, as they always do at the beginning of the Christmas selling season. However, since that happens each year, the seasonally adjusted numbers reported this morning take that fact into account. The tiny seasonally adjusted 1,000-job gain was a sign that employment rose no more than it had in other recent years.
Meanwhile, the number of manufacturing jobs declined by 2,000 as the long slide in employment in that sector continued. In contrast, construction registed a large 55,000 increase and employment in business services rose by 45,000.
Ian Shepherdson, chief U.S. economist for High Frequency Economics in Valhalla, N.Y., said, "The really good news in the report is the 2 cent rise in earnings . . . November wages were only 3.6 percent higher than a year ago. There is no sign of any acceleration in wage increases."
Even with the small rise in earnings last month, that 3.6 percent rise over the past 12 months was a full percentage point higher than the increase in consumer prices over the 12-month period ended in October.
CAPTION: STILL UNDER CONTROL
(This graphic was not available)