JOBLESS RATE STAYS LOW AT YEAR'S END : PRESIDENT TRUMPETS JOBLESS RATE, DISMISSES CONCERNS OVER INFLATION.

Byline: Martin Crutsinger Associated Press 

Unemployment held steady near a seven-year low at 5.3 percent in December as the economy created 262,000 new jobs. A jump in service employment was the biggest since last spring.

While the unexpectedly large increase in payroll employment renewed inflation worries, President Clinton dismissed those concerns and pointed with pride to the jobs created during his first four years in office.

``This is the first time in the history of our economy that over 11 million jobs have been created during one four-year administration,'' he told reporters at the White House.

The unemployment report sent stock prices on a roller coaster ride. The Dow Jones industrial average plunged more than 60 points right after the opening bell Friday as stocks followed bond prices lower. However, by late afternoon, bargain hunters had reversed those losses and the Dow ended the day up 78.12 at 6,703.79, its fourth record high of the week.

Clinton cited no less an authority than Federal Reserve Chairman Alan Greenspan to argue that tight labor markets have yet to trigger rising inflation.

Greenspan has noted that the inflation pressures that might be expected in such a situation ``just have not materialized,'' Clinton said. ``I basically believe . . . that we can keep this going without undue inflation.''

Government price statistics are showing that except for a jump in oil prices, inflation pressures did remain dormant last year even though the economy has now run 28 months with an unemployment rate below 6 percent, a level that economists used to argue represented the threshold for tight labor markets and rising wage pressures.

Still, David Jones, chief economist at Aubrey G. Lanston & Co., said, ``The employment report was surprisingly strong and it has got to capture the attention of the Fed.''

Analysts said that the Federal Reserve was not likely to move as soon as its February meeting but that a rate increase by late March or May was a growing likelihood.

The 262,000-job gain in December was about 70,000 more than expected. In addition, average hourly earnings were up 3.8 percent from a year earlier, a 0.7-percentage point bigger gain than in 1995.

Labor Secretary Robert Reich said worries about wage pressures had been overblown. He said that the higher wages were more than offset by a ``dramatic slide in employer-provided benefits,'' reflecting in part a slowdown in health insurance costs.

The 5.3 percent unemployment rate in December marked the second month that the jobless rate has been at that level. Originally, the November figure was reported at 5.4 percent but that was revised down in Friday's report based on the government's annual benchmark revisions.

According to the revised figures, the unemployment rate hit a seven-year low of 5.2 percent in August and remained at that level through October.

For the year, payroll jobs grew by 2.6 million, the best showing since a gain of 3.8 million jobs in 1994.

For December, the increase of 262,000 was the best showing since a rise of 280,000 jobs in August. It was led by a gain of 112,000 workers in service jobs, the biggest rise in this category since last May.

Joseph Stiglitz, head of the president's Council of Economic Advisers, noted that the service sector has continued to grow strongly in recent months, which he said disproved predictions raised by opponents that the 50-cent increase in the minimum wage that took effect in October would depress hiring of low-wage workers in service industries.

``If there is an impact, it certainly isn't a dramatic one and it isn't showing up in the data,'' he said.

Factory employment rose by 19,000 in December, led by advances in aircraft and a number of other industries. Employment in construction industries was up 23,000.