Jobless rate grows to 4.9% UPS strike affected employment numbers; hourly wages up 0.4%

WASHINGTON — WASHINGTON -- The U.S. unemployment rate rose a tenth of a point to 4.9 percent in August as the economy added jobs at a slower-than-expected pace and total employment was held down in part because of the strike at United Parcel Service of America Inc.

The Labor Department yesterday reported a jobs gain of 49,000 and a 0.4 percent increase in workers' average hourly earnings that met analysts' expectations.


"I think actually it's a pretty strong report," said Nicholas Perna, chief economist at Fleet Financial in Hartford, Conn. "When you make all the adjustments, what you get is payroll number closer to 200,000. To me that's indicative of an economy that's growing, and raising eyebrows at the Fed about an economy growing too rapidly."

Added a cautious Robert Dederick, an economic consultant at Chicago's Northern Trust Co.: "Everything is on the sunny side of disturbing."


The job gain last month contrasts with July's revised increase of 365,000, which was stronger than the government's initial estimate a month ago of a July gain of 316,000 jobs. For the first eight months of the year, monthly job growth averaged 226,000, higher than last year's monthly average of about 216,000 new jobs.

Also, the August rise in average hourly earnings, considered a gauge of labor costs amounted to 5 cents, after a rise of 0.1 percent, or 1 cent, in July. Labor costs account for two-thirds of consumer prices.

Because the striking UPS workers were off the job during the week of Aug. 12, when the employment survey was conducted, the Labor Department counted those jobs essentially as having disappeared. Labor Department officials said their analysis showed that the strike's net effect on employment was a decline of about 155,000 jobs as the U.S. Postal Service and other UPS competitors added workers.

Taking everything into account, the Bureau of Labor Statistics estimates that the UPS strike cost the economy 153,000 to 155,000 jobs in August, said BLS Commissioner Katharine Abraham. "That doesn't take into account any effects on employment that might have occurred because folks in other industries couldn't get supplies and may have had to lay people off," she said. "It's just a rough estimate."

By a different measure that excludes transportation workers and government employees -- which avoids the effects of the UPS strike as well as fluctuations in government hiring tied to the start of the school year -- the economy added about 130,000 jobs in August. This so-called core jobs component has averaged a monthly gain of about 198,000 over the past half year, according to analysts at MMS International in San Francisco.

Analysts noted that elements of the employment report raised red flags about the potential for higher inflation ahead. For instance, the percentage of unemployed workers who voluntarily quit their jobs last month -- a statistic that Fed Chairman Alan Greenspan has said he watches -- rose to 13.7 percent in August from 12.6 percent in July.

Labor Department officials said that number was unlikely to have been skewed by the UPS strike.

Moreover, the economy is showing other signs of strength. "Gains in factory jobs and the workweek mean industrial production rose solidly," said Mark Vitner, an economist at First Union Corp. in Charlotte, N.C. "Make way for more reports of strength. They are already headed your way."


Still, there are few signs that inflation is poised to surge. The administration forecasts that the consumer price index will rise 2.7 percent this year and 2.5 percent in 1998. Interest rates are seen falling next year, according to administration economists.

"The economy is not about to overheat," said Bruce Steinberg, chief economist at Merrill Lynch in New York. "Competitive pressures continue to deny companies pricing power."

That helps keep the Fed on the sideline. "Remember, Fed officials are the enemies of inflation, not growth," said Diane Swonk, deputy chief economist at First Chicago, NBD.

Pub Date: 9/06/97