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Unemployment Drops to 5.9%, a 4-Year Low

October 08, 1994|ROBERT A. ROSENBLATT | TIMES STAFF WRITER

WASHINGTON — The nation's economy enjoyed a healthy expansion of 239,000 jobs last month, cutting the unemployment rate to 5.9%, the lowest level in four years, the Labor Department reported Friday.

Apparently because job gains fell slightly below expectation, the financial markets, always fearful of inflationary pressures, remained calm.

The Dow Jones industrial average of blue chip stocks gained 21.87 points to close at 3,797.43 in moderate trading. Interest rates eased. The key 30-year Treasury bond yield fell to 7.91%, down from 7.96%, a 28-month high on Thursday.

President Clinton was jubilant as the unemployment rate fell from its 6.1% level in August. "We're getting our economic house in order," he said during a White House news conference. "Jobs are being created at home."

But the national business expansion is still running far ahead of California, which is moving much more slowly out of the doldrums of recession. The state's jobless rate dropped to 8.3% last month, down from 8.9%. However, California's total employment still lags about 300,000 below its peak in June, 1990. The nation by contrast, has added 5 million jobs since then.

In Orange County, unemployment stood at 5.9% for August, the latest month for which figures are available. That was down slightly from July's jobless rate of 6.2%.

Los Angeles County's unemployment rate improved to 8.3% in September, a sharp gain from 10.3% in the previous month. However, experts noted that the individual monthly figures are highly volatile, based on a small survey sample and without adjustment for seasonal changes, such as the return of summer workers to schools and colleges.

"I think people are looking for signs that the worst is over but it may not be that time in Los Angeles," said Vincent Canales, labor market analyst for the state's Employment Development Department.

Friday's jobs report marked another step in the delicate dance of expectations involving the business community and the financial markets. Corporations are enjoying increased orders with stable wages and generally want to avoid any actions that would make it more costly for them to borrow money.

But investors in the bond market still have deep-seated fears of inflation eroding the value of their bonds. They worry constantly that falling unemployment could signal labor market shortages leading to higher wages and then to higher prices.

"We really haven't had much true inflation but the bond market has become overly nervous," said Larry Kimbell, director of the UCLA business project. "Fears have been exaggerated, and markets are kind of hypersensitive."

Many experts had expected employment gains of 260,000 or 270,000 in Friday's national report. When the figure came in at 239,000, the markets were temporarily reassured. But there are still widespread expectations that the Federal Reserve Board could raise rates at its Open Market Committee meeting next month.

The reports on wholesale and consumer prices scheduled for next week could precipitate Fed action if those statistics show a blip in inflation, said Martin Regalia, chief economist for the U.S. Chamber of Commerce.

"The Fed wants to raise rates--that is clear," he said. "They are perched on the cusp of the next increase," he said.

Last month's jobless rate was the lowest since October, 1990, when the jobless figure was 5.8%. However, the government revised its survey this year and the numbers may not be precisely comparable.

But there is little doubt that a solid economic expansion is under way, although growth is somewhat slower than during the first half of the year.

Much of the growth is coming in services, with major expansions in retail trade.

Manufacturing is growing more slowly, because companies prefer to pay overtime and keep their work force stable, rather than hire new employees. The workweek averaged 42 hours last month, with 4.6 hours of overtime, some of the highest levels since World War II.

There were 123.6 million Americans working last month. Unemployment totaled 7.7 million.

In Sacramento, Gov. Pete Wilson said: "Although the unemployment rate is a volatile statistic, this demonstrates a continuing sign on an improving economy."

There were 14.2 million persons working in the state last month, a gain of 149,000 over August, according to the government's household survey. A separate government survey of business payrolls, considered more accurate, showed a net gain of 4,000 jobs.

The number of unemployed Californians fell to 1.3 million, a healthy drop of 77,000.

"We have started to make our recovery," said John O. Wilson, chief economist of the Bank of America. After averaging job losses of 167,000 a year between 1990 and 1993, California should have a net job gain of 100,000 for this year and 150,000 next year, the BofA economist said.

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