Nationwide Employment Surged During February Wall Street ‘Cheers,’ Despite Speculation That News Will Push Greenspan Toward March Rate Increase

Employment surged in February as good weather boosted construction, and economists predicted the jobless rate, already down to 5.3 percent, could sink by the end of the year to levels unseen in a quarter-century.

President Clinton hailed the report, issued by the Labor Department on Friday, as evidence the economy is on the right track.

“Today we learned some very good news about the American economy,” he told a news conference. “Our nation has created almost 600,000 new jobs in the first two months of 1997.”

Economists agreed and, for once, even Wall Street investors cheered. They refused to allow inflation worries to spoil a rally. The Dow Jones average of 30 stocks pushed above 7,000 for the first time since Feb. 25, the day before Federal Reserve Chairman Alan Greenspan warned of “excessive optimism” in the market. It rose 56.19 points to close at 7,000.89.

“We have a very active economy, a very tight labor market and that is terrific news for Main Street America,” said economist Allen Sinai of Primark Decision Economics in New York. “American workers will earn more money and the unemployment rate is likely to move to 5 percent or below.”

The rate - which hasn’t dropped below 5 percent since March 1973 - declined in February from 5.4 percent in January, returning to the level of November and December. It was 5.2 percent, the lowest in six years, from August through October.

The Labor Department said U.S. employers added a seasonally adjusted 339,000 jobs to their payrolls in February after a gain of 247,000 in January. February marked the largest increase in nine months and was roughly 100,000 more than anticipated.

Several economists said the report made it more likely than before that Federal Reserve policy-makers would bump short-term interest rates higher this spring - at either of their March 25 or May 20 meetings. But markets remained calm because 109,000 of the new jobs came in construction, which was helped by unseasonably warm weather.

Traders also focused on the fact that wage gains remained moderate. Average hourly earnings for private production workers rose three cents last month to $12.09 after gains of two cents in January and five cents in December.

But even allowing for special factors, analysts said the report showed the economy expanding briskly after growing at a robust 3.9 percent annual rate in the last three months of 1996.

“There really are precious few signs of any significant slowdown,” said Norman Robertson, economic adviser to Smithfield Trust Co. in Chicago. “This economy has proven much stronger and much more durable than most people anticipated.”

And job markets across much of the country are even tighter than national figures indicate, said economist Mark Zandi of Regional Financial Associates in West Chester, Pa.

Of 340 metropolitan areas tracked by the government, 63 percent had unemployment rates below 5 percent in the fourth quarter, 39 percent below 4 percent and 13 percent below 3 percent, he said.

“Going back all the way to World War II, it’s never been this strong,” he said.

“The only reason the national jobless rate is so high is that New York and Los Angeles have some slack in their labor markets and, of course, those markets are very large,” he said.

In another sign of strength, the Federal Reserve said borrowing by American consumers grew at an 8.4 percent annual rate in January.

That followed growth at a 3.9 percent rate in December and was the strongest in five months.

Revolving credit, primarily credit cards, expanded at a 20.6 percent rate, the fastest pace in 16 months.

Meanwhile, in addition to construction, job growth was strong in services, particularly computer and data processing, engineering and management services. Retail trade recorded an increase of 49,000 jobs. Manufacturing jobs, however, edged down by 2,000.

By category of worker, the unemployment rate in February was 3.9 percent for both white men and white women, 10.3 percent for black women, 9 percent for black men, 14.6 percent for white teen-agers, 34.3 percent for black teen-agers and 8.1 percent for all Hispanics.