The nation’s unemployment rate edged down to 5.6 percent in June as a rebound in hiring for temporary summer jobs and construction helped lessen fears that the economy was sliding into a recession.
The Labor Department report, which showed unexpected strength in June and a less bleak performance in the two previous months, came just a day after the Federal Reserve cut a key interest rate by 0.25 percentage point in an effort to give the economy a boost.
The central bank might have delayed its interest rate cut had it had the benefit of the new jobless statistics, analysts said. But they insisted that the Fed would have still moved, probably in August, to begin cutting interest rates because of continued job loss in the key manufacturing sector.
“This report shows the economy isn’t collapsing, but it is still struggling,” said Robert Dederick, an economist at Northern Trust Co. in Chicago. “The real question is whether the weakness in manufacturing will spread to the rest of the economy.”
The Clinton administration breathed a sigh of relief at the better job figures. Labor Secretary Robert Reich said with the latest gains, the economy has now created 7 million jobs since President Clinton took office in January 1993.
In a statement, Clinton said: “Seven million jobs in 30 months is very good news, but still not good enough: Millions of Americans are working harder than ever just to stay in place.”
“In order to increase incomes for hard-working Americans, we must remain committed to a broadbased economic strategy to reward work, balance the budget, open markets for American goods, invest in education and training, target tax cuts to helping families invest in their futures, and take serious steps to health reform while protecting Medicare,” Clinton said.
Joseph Stiglitz, chairman of the president’s Council of Economic Advisers, said the report was “a welcome sign that, while too many working families are still struggling, the current economic slowdown is likely to be temporary.”
Meanwhile, the United States and Japan staged a surprise joint intervention in currency markets today in an effort to make sure that the Fed’s rate cut does not put downward pressure on the dollar. Lower rates in the United States can make dollar-denominated investments less attractive to foreign investors.
The intervention had modestly positive effect, lifting the dollar to 86.88 yen in late morning trading.
“There wasn’t a compelling need to intervene because the dollar wasn’t under downward pressure,” said Robert Hormats of Goldman Sachs in New York. “They probably wanted to remind the markets that the United States and Japan are working together to support the dollar if the need arises.”
The Fed’s reduction to 5.75 percent in the federal funds rate, the interest that banks charge each other, prompted more banks to announce today cuts in their prime lending rate, the benchmark for millions of loans.
Today, New York-based Chemical Banking Corp., the nation’s third largest bank, and First Chicago Bank announced they were trimming their prime rate from 9 percent down to 8.75 percent.
The Labor Department report showed payroll employment rose by an unexpectedly large 215,000 last month.
But analysts said much of the strength in the June report came from special factors including one extra week between surveys, giving employers more time to hire people, and a big improvement in weather conditions that boosted construction jobs.