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Figures cut inflation fears
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August 2, 1996: 4:22 p.m. ET
Higher U.S. jobless rate makes Fed rate increase less likely
From Correspondent Rhonda Schaffler
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NEW YORK (CNNfn) -- Stocks and bonds received some good news Friday as the July U.S. employment report put inflation fears to rest for many investors.
The Labor Department reported that the U.S. unemployment rate rose 0.1 percentage points to 5.4 percent, while job growth slowed and average hourly wages dipped.
Labor said the U.S. economy created about 193,000 jobs in July -- a bit less than most economists had forecast, and down from job growth's torrid pace in the second quarter.
The retail sector, which includes restaurant jobs, led the hiring by adding 89,000 positions.
But at least 10,000 of those positions were temporary jobs related to the Atlanta Olympic Games.
In the government sector, the economy created 37,000 new jobs in July, including many school-teaching positions.
Construction hiring also picked up, with 25,000 jobs added last month.
However, the manufacturing sector lost 20,000 jobs.
Average hourly earnings, a key inflation indicator, also fell 2 cents during the month to $11.80.
Kathleen Camilli, economic-research director for Tucker Anthony, said the figures defied Wall Street's predictions. (125K WAV) or (125K AIFF)
Friday's numbers seem to show the economy isn't growing fast enough to heat up inflation -- meaning the Federal Reserve might not have to raise U.S. interest rates to contain price pressures.
That cheered Wall Street, because higher interest rates tend to hurt stock and bond prices.
Analysts said the data tend to rule out any imminent interest-rate hike from the Fed, whose monetary-policy committee next meets Aug. 20.
Mike Moran, chief economist at Daiwa Securities, said the figures "reduce the urgency for the Federal Reserve to tighten monetary policy."
By contrast, he said that "a short time ago, it seemed like the probability of a hike in rates was very high."
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