Jobs boost adds to US cheer over economy: October factory orders and leading indicators point to revival

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The Independent Online
THE US government yesterday reported a steep fall in unemployment, a fresh surge in factory orders and an advance in a closely watched index that points to continuing solid recovery well into 1994.

The biggest boost came on the jobs front, where the Labor Department announced a drop in the November unemployment rate to 6.4 per cent from 6.8 per cent in October, the largest single monthly decline in more than 10 years.

With the predictable exceptions of the aerospace and defence sector, the gains were across the board, as the economy created 208,000 new non-farm jobs in November.

Even the manufacturing sector, which has long been laying off workers in its drive to improve competitiveness, chipped in 30,000 new jobs last month.

Overall, the number of unemployed Americans fell 534,000 to 8.25 million, the best figure in about three years.

Simultaneously word came from the Commerce Department of a 0.5 per cent gain in October in the government's index of leading economic indicators.

Laura Tyson, head of the President's Council of Economic Advisers, reacted by predicting growth of 3 per cent next year, despite the current economic weakness of much of Europe and Japan.

For the moment at least, all US economic signs are go. Separately, the Commerce Department announced that factory orders climbed a vigorous 1.2 per cent in October.

Earlier this week a private research group reported a massive leap in consumer confidence in November, ahead of the Christmas shopping season.

Especially encouraging for Wall Street was the muted reaction of the bond market to the news.

Normally bond prices decline on signs of economic strength, fearing they will bring higher inflation and interest rates. But in early trading the yield on the key 30-year government bond was virtually unchanged at 6.27 per cent. Nor has the Federal Reserve made any obvious attempt to nudge short-term rates higher.

There was 'no evidence of an uptick in inflation', Ms Tyson said, pointing out that retail prices were rising at only 2.8 per cent annually.

France and Spain reduced their key interest rates yesterday, following a round of reductions earlier this week triggered by a cut in German market rates.

The Bank of France eased its leading intervention rate by 20 basis points to 6.2 per cent, while the Bank of Spain dropped its key money rate a quarter point to 9 per cent. The moves were seen as too slight to counter recession but were welcomed by the foreign exchange markets.

The French franc rallied more than a centime to a high of Fr3.4335 to the mark, within striking distance of its former floor in the European exchange rate mechanism for the first time since the virtual collapse of the ERM on 2 August. The currency later eased back to Fr3.4375.

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