Year Ends On A Strong Note
By Dr. Constantine G. Soras, Economics Editor
Inflation Under Control; Despite A Downsizing Trend, Economy Continues To Add Jobs
The most recent economic reports show that the U.S. economy was quite strong in its final
stretch for 1998, despite a weakness in manufacturing.
The jobless rate dropped to 4.4 percent in November from 4.6 percent, close to the lowest rate in three decades. The economy continued to add jobs at a fast pace in November, despite corporate downsizings and weakness in manufacturing.
Non-farm payrolls grew by 267,000 jobs in November, a bit better than the average gain of 255,000 in the first five months of 1998. Construction employment rose by a sizable 47,000 jobs as favorable weather kept seasonal layoffs in heavy construction and special trade contractors smaller than usual. Manufacturing jobs were reduced by 47,000 with a fifth of the loss coming from the apparel industry.
Despite tight labor markets, inflation is well under control. The Producer Price Index for finished goods declined 0.2 percent in November, led by a 1.2-percent drop in energy prices. The core index, which excludes food and energy prices, edged up 0.1 percent in November, but was down 0.7 percent from a year ago.
The Consumer Price Index rose 0.2 percent in November for the second month in a row. Energy prices were unchanged in November after rising 0.9 percent the previous month. From a year ago, overall consumer prices have moved up just 1.5 percent, due to cheap imports and the collapse in energy prices.
Industrial Output Falls After Two Months Of Growth; New Home Construction Booming
Industrial output fell 0.3 percent in November after rising 0.2 percent in October. Warm weather
cut utilities output for the second month in a row. Utility output declined 3.4 percent in November
due to lower heating needs. Factory output was unchanged after rising 0.6 percent in October.
The operating rate dropped to 80.6 percent of capacity in November from 81.6 percent the previous month. The November rate fell below the 1967-1997 average by 1.5 percentage points and was the lowest rate in more than five years.
Low interest rates and mild weather kept construction on new homes in high gear. Builders started work on 1.65 million units, off only 2.7 percent from 1.694 million in October. Starts rose 12.0 percent in the West to 401,000 units but declined in all other regions. New home building dropped 7.2 percent in the Midwest, declined 6.5 percent in the South and fell 5.6 percent in the Northeast.
Business sales rose 0.2 percent in October following a sharp gain of 0.9 percent in September. With business inventories up 0.4 percent in October, the inventory-to-sales ratio was left intact at 1.39.
Shipments By Textile Manufacturers Bounce Back; The Industry’s Output Decreased Slightly
Results for textiles and apparel were mixed. Textile output eased 0.8 percent following an
increase of 1.2 percent in October. The operating rate for textiles fell to 82.6 percent from 83.3
percent in October, according to revised data back to 1992. The revisions show that the industry’s
output was 2.4 percent higher than previously reported by the Federal Reserve.
Shipments by textile manufacturers rebounded 1.6 percent in October after falling 3.0 percent the previous month.
The industry’s payrolls went down 0.6 percent in November, after falling 1.1 percent the previous month. On the bright side, average weekly hours worked rose 0.5 percent in November after surging 1.5 percent in October.
Consumers were in a full holiday buying mood in November, indicating that they were confident about the pace of economic activity. Retail sales rose 0.6 percent despite weak demand for higher priced cold-weather merchandise. Spending went up twice as fast in October.
Producer prices of textiles and apparel declined 0.2 percent in November for the second month in a row. Prices for finished fabrics took a 0.8 percent nose dive and fell 0.5 percent for synthetic fibers, and for processed yarns and threads. Prices for greige fabrics rose just 0.3 percent.