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Job, Wage Pressures Heighten

You may fire when ready, Greenspan.

The Federal Reserve got its smoking gun on inflation Friday when the Labor Department reported 310,000 new jobs and a 0.5 percent gain in average hourly pay in July. The jobless rate remained at 4.3 percent.

Bonds and stocks futures fell immediately.

The job growth and wage gains were far higher than expected by Wall Street, which has been dreading such a strong job report less than three weeks before the Federal Reserve meets to consider raising interest rates.

The wage gains suggest that tight labor markets are finally pushing wages higher, a possible precursor to general inflation in the economy. Last month, Federal Reserve Chairman Alan Greenspan said the Fed would act "promptly and forcefully" to quell inflation if necessary to stop inflation. He specifically mentioned wage inflation as a warning sign.

A panel of economists surveyed by forecast jobs gains of 216,000 and for wages to grow 0.3 percent. Other consensus forecasts published by other new services were farther off - averaging 200,000 new jobs.

The department also revised June's payroll gains slightly higher to 273,000 from 268,000 and May's payrolls from a net loss of 5,000 to a 28,000 gain.

The only moderation in the report came from the separate household survey, which showed that employment fell by 125,000 in the month as 154,000 adults left the workforce. The markets generally do not follow the household survey, which can vary widely from the business survey in the short run. In the long run, the two surveys generally tell the same story.

The job growth was strong throughout the economy in July. Manufacturing jobs increased for just the second time in 15 months, growing 31,000. Factory employment may have been boosted by seasonal factors, which assume larger layoffs in summer months than occurred.

Service sector industries added 260,000 jobs, with a hefty 91,000 in retail. Health services added 19,000 jobs. Finance and real estate gained 13,000, as mortgage companies lost workers while securities firms added workers.

Construction industries added 22,000 workers, about the same as in June. Government employment grew by 16,000.

Average hourly pay gained 6 cents to $13.29, a 0.5 percent increase, a continuation of the steady acceleration in wage increases since March. Average pay is up 3.8 percent in the past 12 months while productivity has risen 2.2 percent.

The biggest wage gains came in mining and manufacturing, industries with high productivity gains. Wage increases in service-producing jobs were just 0.4 percent, but the trend in services is also toward bigger raises.

The average workweek remained constant at 34.5 hours in July. The manufacturing workweek rose 12 minutes to 41.9 hours while factory overtime rose 6 minutes to 4.8 hours.

By Rex Nutting

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