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Jobs grew faster than expected in January But unemployment worsened, and wages barely improved


The U.S. economy spawned jobs last month slightly faster than experts had expected, new government figures show. But unemployment got a little worse, and workers' wages barely budged. Those developments should reassure financiers who have been worried about inflation, economists said.

The country's employers added 271,000 jobs in January, after adjustments to smooth seasonal fluctuations, the Labor Department said. Unemployment rose from 5.3 percent, where it had been in November and December, to 5.4 percent.

"The overall picture here is that you've still got some growth, and it's not too fast, and it's not inflationary," said Bill Cheney, chief economist for John Hancock Financial Services in Boston. "It's really the best of all worlds."

The January employment report, this year's first major economic reading, was expected to show payroll growth of about 230,000 jobs, according to analyst surveys. But flaws in statistical adjustments for seasonal variations could have exaggerated the reported 271,000 mark by up to 50,000 jobs, said Katherine Abraham, commissioner of the Bureau of Labor Statistics.

On the whole, several economists said, yesterday's report suggests that the economy is slowing substantially from last quarter's rapid, 4.7 percent annual rate of increase in gross domestic product. The January data disclosed yesterday are more consistent with GDP growth of 2.5 percent, they said.

"After the surge in the fourth quarter, we have been expecting things to slow down a bit, and this is an indication that that is happening," said C. Frazier Evans, senior economist with the Colonial Group, a Boston-based mutual fund company.

Average hourly pay for America's production and nonsupervisory workers grew by only a penny last month, to $12.06, from December's rate.

"This was a decided change," from 1996, when average hourly pay rose by more than a dime some months, said Alan Gayle, director of short-term investments for Capitoline Investment Services in Washington. "You also had a drop in the length of the average work week. That, I think, gave the market some comfort that labor-cost pressures are receding."

The figures justify the Federal Reserve's decision this week to leave short-term interest rates untouched, several analysts said. Since last summer, the economy has veered several times toward the Fed's no-fly zone, where accelerating growth and inflation would cause the rate trigger to be pulled. Many economists still think that the Fed will move to forestall inflation by raising rates later this year. But not Gayle, who correctly bet on the Fed's inaction last summer when many were predicting a rate rise.

"We still think that the next move by the Federal Reserve is going to be to lower interest rates, although that's not going to happen any time soon," he said.

Yesterday's data are supported by other recent indicators of economic slowing -- including a purchasing managers' survey, factory order measurements and consumer confidence readings.

But analysts cautioned that January is an especially difficult month in which to put the economy under an X-ray scope. The end of Christmas retail frenzy causes economic action everywhere to slow down, and cold weather typically stalls construction projects and other initiative, too.

Pub Date: 2/08/97

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