The slowdown in the economy spread visibly to the job market in April, as the unemployment rate jumped three-tenths of a point, to 5.8 percent, and the number of new jobs fell for the first time in more than two years, government figures showed Friday.
Analysts regarded this as the most definitive in a series of recent reports showing a sharp deceleration of the economy. While few suggest that the slowing growth could turn in to a recession, the trend has started to raise fears that the Federal Reserve’s anti-inflation campaign may have been too severe. In fact, some experts have begun to speculate that the Fed could begin reducing interest rates, perhaps by the end of the summer.
While Friday’s report on the labor market, the first comprehensive gauge of economic conditions for April, included many signs of weakness, various special factors made it unusually difficult to interpret. Most analysts concluded that the results were not as bad as they first appeared, and few saw the economic expansion, which recently entered its fifth year, as being near an end.
“The rise in unemployment confirms that the economy has slowed down, although this is not a sign of recession,” said Jerry Jasinowski, president of the National Association of Manufacturers.
The bond market, seeing the jobs report as evidence that the Federal Reserve would not push interest rates up further, rallied on the job figures. Long-term interest rates dropped to about 7 percent, the lowest level in a year.
Stocks tumbled, then recovered half their losses as investors were apparently reassured that the economy was not in collapse.
Analysts said the lower long-term rates could help revive the housing sector, one of the main casualties of the Fed’s ratcheting up of interest rates seven times from February 1994 to February 1995. Lumber and home furnishings were among the weakest industries in the job report.
Factory jobs, which have been on a steady upward trend since late 1993 and are relatively immune from the seasonal and other distortions that affected other elements of the employment report, have declined for two straight months. Factory hours have eased from unusually high levels.