The nation’s unemployment rate edged up to 5.6 percent in November as continued job losses in manufacturing served to underscore how much zip has gone out of the economy.
Many private economists said Friday that the weak employment report, combined with a report showing new home sales falling for a third straight month, would force the Federal Reserve to cut interest rates later this month.
“The economy could use a little shot of Geritol. That is what the Federal Reserve is in the business of supplying,” said Robert Dederick, economic consultant at Northern Trust Co. in Chicago.
Not all analysts were convinced, however, that Fed policy-makers will cut rates when they hold their final 1995 meeting on Dec. 19. Some say the Fed will delay a cut if the budget battle between Congress and President Clinton is still raging.
“The Fed will not change rates until the budget situation is settled,” said David Wyss, an economist at DRI-McGraw Hill Inc.
Financial markets, which have been hitting record highs partly on hopes of further Fed rate cuts, rallied initially Friday on the weaker economic statistics but then gave up those gains on a wave of profit-taking.
The November unemployment report showed that the nation’s businesses added 166,000 jobs last month. However, the increase would have been a much smaller 96,000 if it had not been for several statistical quirks.
Analysts also noted that the payroll growth for October was revised sharply lower to an anemic 66,000 gain and for the past three months has averaged just 107,000, a significant decline compared with last year, when gains were averaging more than 200,000 jobs a month.
In the housing report, the Commerce Department said that sales of new single-family homes slipped 2.7 percent in October, marking the third straight decline even though falling mortgage rates had been expected to spur sales.
The housing and unemployment statistics followed a spate of reports suggesting a slowdown in economic activity.
The Clinton administration, while insisting that the economy is not in any danger of slipping into a recession, conceded that a growing pile of unsold goods was acting as a drag on activity.
The 0.1 percentage point increase in the overall jobless rate returned the unemployment level to where it had been in September.