Today, the Labor Department released its report on the Employment Situation during December. The reported unemployment rate for last month was unchanged at 5.6%.

According to the report, 151,000 new jobs were created during December. But, 30,000 of those jobs were Boeing employees returning to work after their strike. So, in reality, only about 120,000 new jobs came on line. For all of 1995 the economy added 1.7 million jobs -- approximately half the number of jobs created in 1994.

From November to December, average hourly earnings increased from $11.58 to $11.63. To some extent this increase was also influenced by the return to work of the Boeing Employees.

Also today, the Commerce Department released its long-delayed preliminary estimate of real Gross Domestic Product (GDP) for the third quarter of 1995. Today's report showed that GDP rose in the third quarter at an annualized, inflation-adjusted rate of 3.2 percent. GDP measures the total output of goods and services produced by labor and property located in the United States.

Today's release was the first in which the Commerce Department employed new chain-type measurements of real GDP. The chain-weighted measurements are designed to account for changes in spending patterns due to shifts in prices. For example, if the price of steak increases sufficiently, consumers may shift their buying to less expensive cuts of meat. The chain-type measures attempt to account for such shifts.

One impact of the new measurement method has been the lowering of economic growth estimates. During the first and second quarters of 1995, GDP changes, as measured by the old fixed-weight system were +2.7% and +1.3%. Under the new system, those changes were only +0.6% and +0.5%.

Based on figures reported thus far, the annualized, chain-weighted, change in real GDP for the first three quarters of 1995 was +1.4%. This compares with chain-weighted figures of +3.5%, +2.2%, +2.7%, -1.0%, and +1.3% for 1994, 1993, 1992, 1991, and 1990. From 1959 to 1994, the average annualized chain-weighted growth in GDP was 3.2%. So, unless things really picked up in the fourth quarter (and we already know that didn't happen) it looks like economic growth in 1995 will turn out to have been pretty feeble.

The chain-weighted approach will enable more accurate determination of the GDP price deflator, a measure of inflation. Today's report provided encouraging news on the inflation front. For the third quarter, the deflator grew at an annualized rate of just 2.4%.

As part of the GDP report, Commerce also presented quarterly data on corporate profits. During the third quarter of 1995, after-tax profits grew by 11.9%. This compares with profit increases of 13.2% in the second quarter, 25.5% in the first quarter, and 10.6% in the fourth quarter of 1994. This helps explain why the stock market did so well last year.

Byline: Lafferty (MF Merlin)