U.S. jobless rate hits six-year low
Clinton's euphoric, but news causes stocks to plunge
July 5, 1996
Web posted at: 5:50 p.m. EDT
WASHINGTON (CNN) -- Economists didn't expect June's unemployment rate to be much different from May's,
which was an already-low 5.6 percent. But in fact, it did fall -- to 5.3 percent. The unemployment rate hasn't been that low since June 1990.
The Labor Department said Friday that businesses added 239,000 workers to their payrolls during June. The vast majority of the jobs added were in the service industry, including restaurants, bars, and agencies that place temporary workers.
Analysts said preparations for the Summer Olympics in Atlanta also helped boost the total.
Even the average wage rose for June, up 9 cents to $11.82 an hour. It was the biggest one-month wage increase on record, and indicates that not only are more people working, but they are being paid more for their work.
Economists noted that the boost in average hourly earnings, a key indicator of wage pressures, jumped 0.8 percent, the biggest monthly increase on record.
In January,
analysts were concerned that growth was so anemic that the nation was in danger of a recession. But five straight months of strong job gains now have analysts worried more about inflation.
Stocks plummet
It scared the stock market, which interpreted the report to mean that the Federal Reserve Bank may move at its next meeting to raise interest rates in an effort to stave off inflation. The Dow Jones Industrial Average dropped 114 points, the seventh biggest point drop in history, and the NASDAQ Composite dropped 23 points.
The Dow decline was the biggest since a 171-point drop after the February job gain was released.
Bonds also were pummeled as falling demand pushed the yield on Treasury's 30-year bond up to 7.18 percent at closing from 6.93 percent on Wednesday.
But the
Clinton administration was tickled about the increase in jobs, and took credit for the upturn.
The president said the figures showed "the most solid American economy in a generation." He attributed the drop in unemployment to economic measures his administration has implemented, including strategic moves to reduce the federal deficit, expand trade, and invest in training people for the new economy.
"Our critics said it wouldn't work," Clinton told reporters at the White House. "But today's news, once again, proves them wrong."
The Clinton administration downplayed the report's other ramification -- that more money in the economy could encourage more inflation. The president's staff argue that rising productivity is giving workers room to enjoy higher wages without risking inflation.
Despite the fact that the United States is now in the third-longest peace-time expansion in history, the campaign staff of Republican presidential candidate Bob Dole said the jobs numbers probably would not help Clinton's campaign that much.
Republicans say a slow-growth economy has made workers anxious, and 20 percent of new jobs have gone to people taking a second job to pay their bills.
"Even as more people found jobs last month, a stunning 70 percent of Americans agreed the country is on the wrong track," said Dole campaign spokesman Nelson Warfield. "If people are finding jobs but are still unhappy about where the nation is headed, Bill Clinton is in serious danger of unemployment himself."
The Federal Reserve is almost guaranteed to push interest rates up to stave off inflation. Its next opportunity will be at its next meeting, on August 20
CNN - U.S. jobless rate hits six-year low - July 5, 1996