While Asian economies were faltering last month, the United States kept chugging, creating almost twice as many jobs as analysts expected and driving unemployment to its lowest level in almost a quarter-century.
A government report yesterday showing the births of 404,000 jobs in November and an unemployment rate of 4.6 percent supplied the latest evidence of an economy that has surpassed the expectations of even the most optimistic seers.
"The report is unambiguous. The economy is soaring, and growth is actually accelerating as we near the end of the year, instead of decelerating," said economist Mark Zandi of Regional Financial Associates in West Chester, Pa.
October unemployment was 4.7 percent.
The good news wasn't confined to sheer numbers of jobs, either.
Average hourly earnings rose 7 cents to $12.47 in November, adding to a series of recent pay gains and yielding an increase of 4.1 percent over the past 12 months. That's twice the rate of inflation, meaning that workers are staying well ahead of price erosion.
For once, New York stock markets didn't give a Bronx cheer to good employment news.
The Dow Jones industrial average popped by 98.97 points to 8,149.13, and the Standard & Poor's index of stocks in 500 big companies set a record, rising 10.69 to 983.79. Over and over again in recent years, stocks have plunged on strong employment reports as investors worried that the economy might overheat, fuel inflation and drive up interest rates.
This time, stock players "are looking at the plus side of the equation in terms of good corporate earnings growth," said Patrick Bradley, an economist with Mercantile-Safe Deposit & Trust Co. in Baltimore. More workers mean more solvent consumers who prompt more demand for corporate products.
"If you look at what investors are doing, they're basically telling you that everything's going to be just fine," Bradley added.
Some analysts had other interpretations of investors' motives, however.
And in doing so, they cast the Labor Department report in a slightly more somber light.
"It's not what it appears," said David Orr, an economist with First Union Corp. in Charlotte, N.C. While the report was "stunningly strong," Orr said, "we're not having a new surge of job creation, a whole new round of super rapid job growth."
Orr said he thinks that November job growth was overestimated, making up in part for reported growth in August of only 58,000 jobs, which was probably underestimated. Average monthly employment expansion over the last four months is 260,000, which is probably closer to the truth, he said.
Even if the November job surge is real, there are reasons to doubt its staying power. In the Pacific Basin, plunging currencies, weakening demand and scarcer capital are widely expected to clip U.S. growth next year.
What stock investors were really paying attention to yesterday, some analysts said, was not the jobs report but a dispatch by Bloomberg News saying that the Federal Reserve, the U.S. central bank, shares the view that Asian troubles will wash up here.
Bloomberg quoted an unnamed "senior Fed official" as playing down the chance that the Fed will raise interest rates anytime soon. The Fed doesn't have to, the official said, because the Asian crisis will slow the U.S. economy and remove inflationary pressure just as well as any rate boost would.
Stock investors fear interest- rate increases because they make bonds a more attractive place to invest, because they drive up corporate costs and because they dampen consumer demand.
"The tail winds behind the U.S. economy are strong, but the economy is about to run into powerful head winds," said Bruce Steinberg, chief economist for Merrill Lynch, a New York-based investment company.
"The Asian crisis should begin to affect growth in early 1998."
Economists still expect the U.S. economy to grow by more than 2 percent next year after coming close to 4 percent expansion this year.
Yesterday's employment report suggests that the economy is more than strong enough to blow into its eighth straight year of growth next year and withstand substantial gales from the East, analysts said.
And, anonymous Fed rhetoric aside, many economists feel that inflationary pressures are getting more severe and that interest rates may rise in response.
Indeed, rates popped up yesterday as the yield on the lTC Treasury's main 30-year bond rose to 6.09 percent from 6.04 late Thursday.
When unemployment falls to low levels, employers must pay more for labor and often add the higher costs to their prices. Some economists believe that rising productivity -- getting more from an hour of labor -- will allow producers to hold fast on prices even as pay goes up.
But Zandi said he thinks productivity growth will slow, and, he added, "Companies are going to be under extreme pressure to raise prices. They're going to be trying very hard to do it."
The last time unemployment was this low was October 1973, right before the first of the oil shocks rocked the economy and sent the jobless rate rising.
The proportion of Americans working reached an all-time high last month: 64 percent of the country's population, up from 63.7 percent in October, the Labor Department said.
About one-fourth of the new jobs in November came in the retail trade.
The 105,000-job retail rise was the biggest in nearly three years.
The overall rise of 404,000 was the sharpest increase since February 1996, when the East Coast was recovering from January blizzards, and it outstripped October's strong addition of 287,000 jobs.
The unemployment rate for adult men fell to 3.8 percent in November from 4.1 percent in October.
The jobless rate for adult women stayed the same at 4.0 percent.
Among blacks, it rose from 9.5 percent to 9.6 percent.
L Among whites, the rate fell from 4.1 percent to 3.8 percent.
For Hispanics it fell to 6.9 percent from 8 percent.
Pub Date: 12/06/97