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US inflation fears after boom in employment

Rupert Cornwell
Friday 01 April 1994 17:02 EST
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WASHINGTON - Jittery financial markets are braced for new tremors after news that the United States economy created more jobs in March than in any month for more than six years - evidence of a buoyant recovery which investors fear will drive inflation and interest rates higher, writes Rupert Cornwell.

The US Labor Department says 456,000 Americans found jobs last month - double the most optimistic forecasts.

The White House hailed the figure as proof that the administration's economic policies were on track.

But while the dollar surged, bond prices plunged in thin unofficial Good Friday trading. By midday, selling of the benchmark US Treasury 30-year bond had driven yields to 7.25 per cent, their highest level in some 15 months.

This bond market weakness has been the prime factor in the slump on Wall Street, where prices have dropped nearly 9 per cent from record highs earlier this year.

Objectively, the unemployment report makes less than terrifying reading. Three-quarters of the new jobs were part-time, and the unemployment rate stayed at 6.5 per cent.

Only 12,000 jobs were created in manufacturing.

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