BLS DAILY REPORT, TUESDAY, JULY 2, 1996 RELEASED TODAY: Most state unemployment rates showed little change in May, as 40 states recorded changes of 0.3 percentage point or less. The national unemployment rate returned to its March level of 5.6 percent. Nonfarm payroll employment rose in 43 states in May .... Coming off an unexpectedly robust first half of 1996, the U.S. economy has begun the process of moderating for the rest of the year, predict 22 economists surveyed for BNA's midyear forecast (Daily Labor Report, pages 1,C-1). Most of these analysts expect the Federal Reserve to raise interest rates to counter inflationary pressures that might take hold, such as those posed by labor shortages. The forecasters admit to being caught off guard by the strength of the economy in the first and second quarters. But business conditions are in the process of changing for the third and fourth quarters of the year, they say, stressing that the slowdown will not be anything like a recession. Later this summer and into the fall, higher interest rates should dampen activity in interest-sensitive sectors, especially housing and autos ....A slower economy by autumn will translate into slower job growth, economists pointed out. The national unemployment rate will edge up slightly by early 1997, they said. Most economists said they will be watching labor markets with keen interest, following large and unexpected surges in payroll growth in recent months and anecdotal evidence that wage pressures may be developing in some regions of the country. A few analysts said they expect those wage increases to translate into a higher inflation rate by the end of 1996. However, most are looking for the CPI to stay in the 3 percent range as energy prices moderate during the summer months .... Manufacturing picked up steam in June, with production, new orders, and order backlogs pointing to a resurgence in the sector, the National Association of Purchasing Management reports. The overall economy continued to expand in June for the fifth consecutive month, the report says ....(Daily Labor Report, page A-7; Washington Post, page C1; New York Times, page D5; Wall Street Journal, page A2). Total personal income rose 0.4 percent seasonally adjusted in May, but the pace of consumer spending picked up to a 0.8 percent increase, according to the Commerce Department's Bureau of Economic Analysis ....Wages and salaries -- which constitute somewhat more than half of total income -- climbed 0.5 percent in May, with larger gains in service and distributive industries than in manufacturing ....(Daily Labor Report, page D-1; Washington Post, page C1; New York Times, page D5; Wall Street Journal, page A2).
