BLS DAILY REPORT, MONDAY, DECEMBER 9, 1996

__Nonfarm payroll employment grew by a less-than-expected 118,000 in 
November, and the unemployment rate edged up to 5.4 percent. 
 Employment growth was widespread but modest in November, and the 
jobless rate increased 0.2 percentage point in the month.  Both the 
service and manufacturing sectors contributed to job growth in 
November.  But, government employment declined in the month, mostly 
due to shifts in hiring patterns of teachers and problems adjusting 
for these changing cyclical variations.  Private analysts say the 
November employment report further confirms the economy has slowed 
considerably from the brisk pace of the second quarter .....Most 
analysts discounted the importance of the 0.2 percentage point 
increase in the jobless rate.  "Much of the gain in unemployment 
occurred in a narrow age group -- 18- and 19-year olds -- though I 
would hesitate to attach any analytical significance to this single 
month's movement," said BLS Commissioner Katharine Abraham at a press 
briefing following the release of the jobs report ....(Daily Labor 
Report, pages 1,D-1,E-1).
__The stock market took its sharpest plunge in five months after 
Federal Reserve Board Chairmen Alan Greenspan criticized "irrational 
exuberance" on Wall Street, but by day's end, stocks had recovered 
most of their losses ....A major sell-off was thwarted by an 
unemployment report that showed no inflation threat ....A subtle 
warning, a missed signal -- Markets mistake Greenspan comment as 
indication of rate rise ....(Washington Post, Dec. 7, pages A1,D1).
__A government report showing a lackluster job market in November 
reassured investors that inflation was not a threat and helped to 
blunt a stock market dive prompted by remarks made Thursday night by 
the chairman of the Federal Reserve ....(New York Times, Dec. 7, pages 
A1,D1).
__Financial markets fought back from a morning drop as comments by Fed 
Chief Greenspan were tempered by a benign jobless report ....(Wall 
Street Journal, pages C1,C14).  The labor market is softening, though 
perhaps not quickly enough to allay concerns about inflationary 
pressures, economists say ....(Wall Street Journal, page A2).

"Tracking the Economy", a Wall Street Journal feature (page A4), shows 
that producer prices are expected to rise 0.3 percent, according to 
the Technical Data Consensus Forecast, compared with a rise of 0.4 in 
October.  The November consumer price all items figure is expected to 
rise by 0.3 percent, identical to last month's change.

__Clinton administration officials and congressional Republicans 
endorsed a Senate advisory panel's conclusion that government 
statistics overstate inflation, opening the door to a discussion that 
could lead to lower cost-of-living adjustments for federal benefit 
programs and boost the prospects for a balanced budget deal. 
 Appearing on "Meet the Press," Treasury Secretary Robert E. Rubin 
praised the work of the commission ....Rubin said the commission's 
report had helped highlight widely recognized inadequacies in the CPI 
....Rubin promised that White House economists would work closely with 
outside experts in figuring out how to fix the index ....Having 
expressed a tentative, mutual willingness to explore fixing the CPI, 
politicians from both camps said they had few ideas about how that 
effort should proceed ....(The Washington Post, page 1).
__Rubin carefully left the door open to adjusting the CPI as part of 
next year's budget talks ....(Wall Street Journal, page C16).

If the Social Security system "is to survive in its current form," 
either benefits must be cut or payroll taxes increased, Fed Chairman 
Greenspan said ....Along with raising what he called "the 
full-benefits retirement age," Greenspan suggested that future benefit 
increases could be trimmed by recognizing that the CPI overstates 
actual increases in the cost of living ...."Indexing Social Security 
benefits to the CPI goes far beyond the intent of the Congress to 
insulate retirees from inflation," he said ....(Washington Post, Dec. 
7, page F2)_____The Fed chairman voiced skepticism about the idea of 
moving part of the Social Security trust fund's investments into the 
stock market ....(Wall Street Journal, page A2).

"Boskin's Magic Wand" is the title of an op-ed column by Robert 
Kuttner in Sunday's Washington Post.  Kuttner says, "Suppose you could 
wave a wand and make most of our economic problems disappear.  That is 
pretty much what the advisory panel on the consumer price index (CPI) 
proposes ....We are more prosperous than we thought.  By overadjusting 
for inflation, the CPI has undercounted the economy's true growth 
rate.  Median family income, which seemed flat, has actually risen by 
36 percent since 1973 if you accept Boskin.  Also solved is the great 
mystery of why productivity growth slowed down, despite prodigious 
gains in technology.  If we stop over correcting for inflation, 
productivity has been growing smartly.  Best of all, a downward 
adjustment in the CPI makes it easier to balance the budget ....If 
this all sounds a little too good to be true, it is.  The Boskin panel 
reaches its conclusions mainly by adjusting the consumer price index 
for changes in buying patterns and for the quality of products ....The 
trouble with all of this is that the CPI is an index of prices, not 
living standards.  It is easy to track the price of gasoline, or milk 
or new houses over time, as the CPI has traditionally done.  But try 
to make precise adjustments for quality, and you are off into a soft, 
subjective realm that economists find hard to measure ...."







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