The nation's unemployment rate was unchanged in December at 4.1 percent, making the average rate for the entire year 4.2 percent, the lowest since the buildup for the Vietnam War 30 years ago, the Labor Department reported yesterday.
The continued good news on the job front helped send the stock markets soaring, but also reinforced speculation the Federal Reserve Board would raise interest rates again when it meets next month to review the economy.
Martin N. Baily, chairman of the president's Council of Economic Advisers, credited technology and the budget surpluses generated by a booming economy with much of the gains in productivity that have helped sustain the economic growth for the last eight years without triggering inflation.
"Productivity is very important to this equation," he said in an interview, noting that such gains usually begin to erode after the first year of an expansion.
"If we can maintain the fiscal discipline and keep going with investment in the right kinds of things, we have a chance of keeping this expansion going."
The longest economic expansion in the nation's history--107 consecutive months of growth--is expected to be marked next month.
The unemployment rate has stayed at 4.1 percent for the last three months, even as payroll employment has continued to increase. This indicates the economy is able to absorb hundreds of thousands of new entrants in the job market.
The average hourly wage of production or nonsupervisory employees rose 0.4 percent in December to $13.46. The increase was slightly higher than analysts had expected. Over the year average hourly earnings rose 3.7 percent.
The Federal Reserve's Open Market Committee is scheduled to meet Feb. 1 and 2 to consider whether to adjust interest rate targets it uses to affect the growth rate of the economy. Analysts will be closely watching a speech by Fed Chairman Alan Greenspan on Thursday at the New York Economic Club for any signals.
The real question yesterday among many analysts was not whether the Fed would raise rates in February, but by how much. The speculation is the Fed will raise rates either a quarter percentage point or a half of a percentage point, with most analysts figuring a quarter-point rise is more likely.
"I think the employment report strengthens the hand of the Fed to tighten," said David Mead, vice president and chief investment officer for Chicago's Harris Bank. He said he thought President Clinton's announcement that he will nominate Greenspan to a fourth four-year term as chairman also gives the Fed chairman greater freedom to raise rates higher than he might otherwise.
In the Washington region the unemployment rate for November, the latest data available, fell to 2.3 percent, the lowest level in the 10 years that the area's jobless rate has been calculated.
Retail employment increased by 9,000 jobs in November, compared with the previous month, as Washington area stores geared up for the holiday shopping season. Over the past year, employment in the region increased by 68,100 jobs, with technology and construction firms leading the way.
From November 1998 to November 1999 the District created 4,200 jobs. The District's November unemployment rate held steady at 5.7 percent, a further sign of the capital's economic recovery. In the Washington suburbs, the November jobless rate fell to 1.9 percent from 3.2 percent in October, with indications that a scarcity of workers is beginning to crimp business expansion.
The national jobs report for December showed that non-farm employment rose 315,000 in December, even after being seasonally adjusted for the traditional holiday hiring. The rise was nearly 100,000 more jobs than many economic analysts had predicted.
Retail employment rose 65,000 in December, with the second largest employment increase coming in the government sector, where 64,000 jobs were added.
One of the biggest jobs losers was the manufacturing sector, with an over-the-year decline of 248,000 jobs. Manufacturing unemployment was little changed, however, in the last two months and most of the job loss was in the first six months of the year, a sign of increased activity in exports.
The average manufacturing work week last month was unchanged at 41.7 hours. Average overtime work in manufacturing inched up by 0.1 of an hour to 4.7 hours.
Overall, 64.4 percent of the 140.1 million people in the civilian labor force were employed in December.
The unemployment rates for African Americans, 7.9 percent, and Hispanics, 5.9 percent, were the lowest on record, although the jobless rate for blacks continues to be nearly twice as high as whites, a ratio that has prevailed for decades.
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