U.S. Adds 262,000 Jobs in December; Wages Increase

WASHINGTON — The American jobs machine kept churning strongly in December, generating 262,000 new payroll slots as the unemployment rate remained constant at 5.3%, the lowest year-end level since 1988, the Labor Department reported Friday.

The year closed on a strongly encouraging note for workers, with 2.6 million more Americans employed and a 3.8% gain in average hourly earnings.

With inflation remaining negligible, economists said they expect continued steady growth throughout 1997.

“We’re cruising along,” said Gordon Richards, chief economist for the National Assn. of Manufacturers.

The producer price index, which measures inflation at the wholesale level, was just 2.6% for the last year, the government reported Thursday. When the volatile elements of food and energy costs are excluded, the inflation rate was measured at a minuscule 0.6%.

“We can keep this going without undue inflation,” President Clinton said at a White House meeting with business leaders. “At least now there’s no evidence” of inflation, he said.

Another government index shows that for the last three months, Americans’ work activity has been at the highest level ever recorded: 63.4% of the population over the age of 16 was working.

Payrolls are growing at a sustainable pace and should keep expanding throughout 1997 without spurring inflation, predicted Dean Baker of the Economic Policy Institute, a liberal think tank.

The yearly rise of 3.8% in average hourly wages, reported Friday, compares with an increase of 3.2% in 1995, and is a positive sign--”workers feel more confident about their situation,” he said. It is the biggest rise since an identical 3.8% jump in 1990.

Businesses “can’t pass along price increases,” said Gary Schlossberg, an economist with Wells Fargo Bank in San Francisco.

The higher wages support individual and family income growth and keep the economy moving, said Schlossberg, who is forecasting a healthy growth rate of 3% on an annual basis for the first quarter.

The nation’s economic expansion is an impressive one--it has been underway since the spring of 1991--and shows no signs of slowing. The total of 2.6 million new payroll jobs last year surpasses the performance of 2.2 million additional work slots a year before.

To keep pace with the growth in the labor force, the economy needs to produce about 200,000 new jobs a year, but business is moving at a faster pace, thereby driving down the unemployment rate. The December figure of 5.3%, unchanged from November, compares with 5.6% a year before.

The 262,000 gain in jobs last month is the biggest since August’s rise of 280,000.

“We seem to be growing continually at a modest but steady pace,” said Rep. Maurice D. Hinchey (D-N.Y.), a member of Congress’ Joint Economic Committee.

The growth in payrolls has been accompanied by “an enormously good run” for the consumer price index, the government’s yardstick for the cost of living, said Martin Regalia, chief economist for the U.S. Chamber of Commerce.

The CPI has risen at a pace of less than 3% annually in recent years. “The financial markets recognize that,” Regalia said.

The stock market initially dropped Friday, then recovered for a healthy gain. The Dow Jones industrial average closed up 78.12 points to close at 6,703.79, a record.

Business activity grew rapidly in the first half of the year, then slowed for the remainder. “There is a trade-off between how fast you go and how long you grow,” said Regalia, noting that the Federal Reserve Board likes comparatively weak growth rates in the 2% range.

Regalia and many other economists expect that Fed’s rate-policymaking Federal Open Market Committee to stay on the fence at its next meeting, in February, declining to move interest rates.

The big employment gains in December include 112,000 new jobs in the service sector, with 16,000 in health services, 15,000 in computer and data-processing services and 12,000 in amusement and recreation enterprises. Retail trade added 48,000 jobs, and construction employment jumped by 23,000 because December weather was unusually mild.

Manufacturing gained 19,000 jobs in December, but that sector nevertheless suffered a net loss of 94,000 jobs for the year.

The jobless rates for major groups last month, compared with a year ago, are: men, 5.1%, down from 5.7%; women, 5.5%, up from 5.4%; whites, 4.6%, down from 4.9%; blacks, 10.5%, up from 10.2%; and Latinos, 7.7%, down from 9.6%.

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U.S. Unemployment

Percentage of U.S. work force not employed, seasonally adjusted for past 12 months.

Dec. ‘96: 5.3%

Source: AP