Growth in jobs cheers market

The unemployment rate declined last month to 5 percent — the lowest in four years — as American businesses created 146,000 new jobs, the Labor Department reported yesterday.

Layoffs of 18,000 workers at auto plants were offset by job gains in construction, health care, education, professional and business services that were close to the average pace in recent months.

The report showed that more jobs were created in April and May than previously estimated, although a 0.2 percent rise in wages for most workers last month trailed the inflation rate significantly.

The steady if uninspiring growth portrayed in the report cheered Wall Street, coming amid record high oil prices and renewed terrorist attacks that threaten to destabilize the economy. The Dow Jones Industrial Average gained 147 points on the news.

“The economy is still chugging along … not too hot, not too cold,” said Neil Massa, a trader at John Hancock Advisers Inc. “That’s more relevant now to the market than what happened [Thursday] in London.”

Because the gradual growth in jobs has not been rapid enough to spur an inflationary rise in labor costs, the report was good news for investors, he said. “It shows that the economy is not overheated and the Fed doesn’t have to be aggressive in its rate hikes.”

John Silvia, chief economist at Wachovia Securities, said the report highlights diverging trends that have become characteristic of the U.S. economy in an era of globalization.

The United States continues to lose production jobs as businesses open plants in Asia and other regions where workers’ wages and benefit costs are significantly lower. Last month’s 24,000 job losses left manufacturing employment at a 55-year low of 14.27 million.

Meanwhile, such areas as health care, housing and homeland security are growing robustly, raising the demand for skilled and educated workers and driving down the unemployment rate for employees and managers in those fields.

The jobless rate for managers, for example, has plummeted to 2.6 percent even as the rate for production and transportation workers has stayed high at 6.3 percent.

This is leading many laid-off production workers and young people to temporarily drop out of the work force to get the education they need to secure better jobs, contributing to the low unemployment rate, analysts said.

“The news on wages continues to disappoint,” said Peter Morici, business professor at the University of Maryland. “Overall, jobs growth has been erratic and unexceptional. With unemployment at 5 percent and wages continuing to lag inflation, the quality of jobs created has been mediocre at best and discouraging to be realistic.”

Inflation has been climbing at an 0.5 percent average rate since January, he said.

After 31/2 years of economic growth, normally the rate of job growth would be accelerating, Mr. Silvia noted.

But that has not happened because strong demand for goods in the United States increasingly is being supplied from abroad rather than by American workers, he said.

Peter Morici, business professor at the University of Maryland, said the U.S. should act to stem the migration of manufacturing and services jobs overseas.

“The trade deficit and troubles of U.S. automakers cast a large shadow over the job market” and have been holding job growth at lackluster levels despite the boom in housing and consumer spending, he said.

Inexpensive imports not only are bleeding manufacturing jobs, but they also are putting a damper on wages for those still working, he said.

The dollars Americans pay for Asian imports ironically are being recycled in a way that is spurring the strength in housing and consumer spending, he said.

The central banks of Japan, China and other Asian countries are using their export earnings to invest in U.S. Treasury bonds, driving down interest rates and prompting an unprecedented splurge in mortgage financing for homes and a broad array of other consumer purchases.

“Americans continue to enjoy a false prosperity,” he said. “Paper gains on homes and borrowing from foreign governments are powering rising living standards, even as the inflation-adjusted wages of ordinary Americans fall.”