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Jobless rate hits rare low

Unemployment dropped to 4.7 percent, the lowest level in nearly a quarter-century and a sign the economy will end the year with a roar.

But the stock market fell into fresh turmoil Friday. The Labor Department report rekindled inflation fears among investors already worried Southeast Asia's financial crisis will crimp growth and corporate profits next year.

Ralph Bloch, chief market analyst at Raymond James & Associates Inc. in St. Petersburg, says he expects the market to go lower, but probably not below the 7,000 level on the Dow. He says selling pressure is not as severe as it was last month.

But Bloch is still concerned about the health of Japanese banks: "If you get a Japanese bank going belly-up, that will have a withering effect."

For now, the American economy seems to be defying analysts' gloomy predictions.

October's seasonally adjusted jobless rate, down from 4.9 percent in September, was the lowest since October 1973. The rate for adult women _ 4 percent _ was the smallest in nearly 28 years.

"Our economy is the strongest it's been in a generation," President Clinton declared at the White House.

Employers expanded their payrolls by 284,000 jobs, with a broad range of industries registering robust gains. In manufacturing alone, employers added 54,000 jobs _ the largest gain in 7{ years.

Average hourly wages for non-supervisory workers jumped a strong 6 cents to a seasonally adjusted $12.41. That's up 4.2 percent from a year earlier, the largest 12-month advance in eight years.

The stronger-than-expected report did not do anything to calm an already-jittery stock market focused on Asia. And it blunted a bond-market rally fueled by money managers fleeing seesawing Asian markets for safer investments.

The strength raised the question of whether the Federal Reserve will need to raise interest rates to prevent accelerating wage gains from spiraling into increased consumer price inflation.

Most economists believe Fed policy-makers meeting Wednesday will vote for no change, opting to wait for markets to settle down. But analysts are divided over whether the Fed will need to act in December or early next year.

"We're in a tug of war between the strong economic numbers, which suggest the economy will end the year robustly, and the Asian financial crisis, which has the potential for dampening growth next year," said economist David Jones of Aubrey G. Lanston & Co. in New York.

The Dow snapped a rare three-day streak of quiet trading, falling 101.92 points to close at 7,581.32.

Investors fleeing Asia had briefly driven down the yield on the benchmark 30-year Treasury bond, which moves opposite prices, to a near 21-month low of 6.09 percent. But by late Friday, inflation fears had pushed it up to 6.15 percent.

In a separate report Friday, the Federal Reserve said consumer borrowing advanced in September at the slowest pace in three months _ at a 1.9 percent seasonally adjusted annual rate versus 4.2 percent in August.

In October, service businesses added 213,000 jobs, including an unusually large 18,000 gain in financial industries. Computer services added 15,000 jobs and engineering and management services gained 19,000.

"Taken together, these two small industries, which comprise only 4 percent of payroll employment, have accounted for one in nine of the jobs added in the past year," said Katharine G. Abraham, commissioner of the Bureau of Labor Statistics.

Half the 54,000 manufacturing gain occurred in industrial machinery and transportation equipment. Construction added 20,000 jobs, the most since May.

_ Times staff writer Helen Huntley contributed to this report.