Employment Figures Confirm A Slowing U.S. Economy

The fact that both the number of unemployed -- 5.8 million -- and the unemployment rate -- 4.1% -- rose in May increases the possibility that Chairman Alan Greenspan and his Federal Reserve colleagues will not boost short-term U.S. interest rates when they meet at month's end. Their bias probably is still toward raising the federal funds rate by 25 basis points to 7%. But May's higher unemployment numbers -- which included 17,000 fewer jobs in manufacturing and a 0.4 hr decrease in factory overtime to 4.5 hr -- add significantly to the evidence that the U.S. economy is slowing. For example, the National Assn. of Purchasing Management's closely watched manufacturing index dropped 3.1% between April and May, to 53.2 from 54.9, its third consecutive monthly decline. And the Conference Board's composite index of leading indicators, which signal the level of economic activity several months ahead, dipped 0.1% in April following a 0.1% rise in March.