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 ...."