Originally created 06/05/99

Jobless rate hits a 29-year low

WASHINGTON -- Unemployment edged down to 4.2 percent last month, returning to a 29-year low and helping workers who historically have had a harder time finding jobs. Black unemployment hit a record low, and jobless rates for teen-agers and adult women fell to the lowest levels in three decades.

Despite the drop in unemployment, there was only a tiny increase of 11,000 jobs in the nation's payrolls in May -- a sharp slowdown from 343,000 jobs created in the previous month and the weakest showing since a decline in January 1996, the Labor Department said Friday.

Figures show that the economic expansion, the longest in peacetime history, has given the country a low overall unemployment rate while aiding minority groups, who traditionally lag behind in economic gains.

The rate of unemployed blacks fell to 7.5 percent last month, the lowest level since the government began tracking this statistic in 1972 but still far above the 3.7 percent unemployment rate for white Americans. In April, the black unemployment rate was 7.7 percent.

The jobless rate for teen-agers, meanwhile, dipped to 12.6 percent while the rate for adult women fell to 3.6 percent, both 30-year lows.

"Combined with the continued strong overall economic growth, low long-term inflation and continued rising wages, we are widening the circle of opportunity for more Americans," President Clinton said.

The 4.2 percent jobless rate in May matched March's level. Before that, unemployment last touched 4.2 percent in February 1970.

Economists agree that the record length of the expansion, now in its ninth year, and its accompanying tight labor market help spread prosperity to groups that have traditionally had higher unemployment rates than white males.

"Economic prosperity and low unemployment are a boon to those groups who have been faring the worst in the job market," said Bill Cheney, chief economist for John Hancock in Boston. "When the unemployment rate goes down, employers break old barriers and get more creative in their hiring and training."

Labor Secretary Alexis Herman said the strong economy, coupled with an increase in the minimum wage and an earned income tax credit, are "making work more attractive. And as we do that, we have more of a magnet, if you will."

Some employment gains for women, she said, can be attributed to women moving off welfare and into the work force.

Analysts offered mixed views on whether May's tiny 11,000 jobs-creation performance really signified a slowdown in the nation's economic growth or was a statistical fluke.

Financial markets, which had grown increasingly jittery over worries that too-rapid growth would prompt the Federal Reserve to boost interest rates, took heart from Friday's report. The Dow Jones industrial average closed at 10,799.84, up 136.15 points.

The report "indicates that the economy remains on a path of solid, noninflationary growth," said Janet Yellen, chairman of the Council of Economic Advisers.

Instead of showing a decrease in jobs demand, the small gain in payroll jobs could reflect that employers are having trouble finding qualified people in the tight labor market, some analysts said. Others noted that while May's jobs increase was tiny, the April figure had been revised up sharply.

The Labor Department also said that average hourly earnings, a closely watched indicator for inflation, rose by 3.6 percent in May compared to a year ago, just a slight move upward from the previous month.

Private economists remained split on whether the new employment information would make it more or less likely that the central bank's Federal Open Market Committee at its next meeting on June 29-30 will start raising interest rates to slow the economy and keep inflation under control.

"This report should not dissuade the Fed from tightening at the June 30 meeting, despite the soft headline report of just 11,000 new jobs," said First Union economist David Orr.

But Merrill Lynch's Bruce Steinberg disagreed. The weak 11,000 jobs figure "should be sufficient to keep the Fed on hold" at the June 30 meeting.

"Before today, a tightening was almost considered to be a done deal. Now there is a little more doubt," said economist Joel Naroff of Naroff Economic Advisors. Still, he believes odds favor a June 30 rate increase.


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