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U.S. jobless rate climbs to 5.7%

WASHINGTON — WASHINGTON -- In the clearest sign yet that the economy is cooling off, the government reported yesterday that job growth was surprisingly weak in January and that unemployment rose to 5.7 percent.

For all practical purposes, the three-tenths of a point rise in the jobless rate last month was the first increase in unemployment in two and a half years. There was an artificial jump, which made comparisons invalid, when a new method of computing the jobless rate was introduced at the beginning of 1994.

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The latest figures, while subject to quirks of weather and statistics that bar definitive conclusions, reduced the likelihood that the Federal Reserve would raise short-term interest rates again soon, private analysts said.

The Fed has been lifting rates in its effort to prevent inflation from accelerating as the economy advances closer to the low unemployment rate and tight labor market conditions that have historically led to higher wages and prices.

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"The burden of proof is going to be on those who believe additional tightening is needed," said Richard B. Berner, chief economist at Mellon Bank in Pittsburgh.

Securities markets seemed to share the view that the Fed's year-long ratcheting up of interest rates could well be finished for now. Bond prices soared enough to push long-term rates down to 7.62 percent, the lowest level since September, and stocks surged as the Dow Jones industrial average rose 57.87 points, to 3,928.64.

The Fed had noted earlier signs of an emerging slowdown but labeled them "tentative" when it raised rates this week for the seventh time in a year. The signs included soft spots in housing and vehicle sales and a buildup of inventories in warehouses and on store shelves.

A Fed spokesman said yesterday that the central bank had not seen the Labor Department's report on the January job market when it took action Wednesday. He said the customary procedure was followed in which Fed Chairman Alan Greenspan receives economic reports less than 24 hours before their official release.

But not all of the evidence pointed in the same direction. Indeed, analysts said that even if Fed officials had known the contents of yesterday's report it probably would have made little difference. Despite the rise in the unemployment rate and a payroll expansion of only 134,000 -- about half what had been anticipated -- the report showed the economy was still quite healthy.

The latest reading on consumer confidence showed that the economy retains considerable momentum. The University of Michigan's final consumer sentiment index for January rose to 97.6 from 95.1 in December. The university said its index of current economic conditions rose to 112 from 104.9 in December.

"Strength remains," John E. Silvia, an economist at Kemper Financial Services, told his clients. "The economy is not falling off cliff, and the unemployment rate is not rising rapidly."

Echoing that point, the Commerce Department, in a separate report, said factory orders rose 1.7 percent in December and jumped 10.2 percent for all of 1994. The yearly advance was the biggest since 1979 and was nearly double the increase of 1993.

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Indeed, in what Katharine G. Abraham, the commissioner of the Bureau of Labor Statistics, called the "brightest spot" of the jobs report, manufacturing employment climbed 39,000 in January. That is the fourth straight monthly gain, for a total increase of 161,000, in part reflecting the nation's powerful export drive of recent months as Europe and other areas of the world gathered economic strength.

An official said 15,000 of last month's 39,000 increase in jobs were in export-sensitive industries, defined as those in which at least 20 percent of their output is shipped abroad.


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