‘85 Growth in Economy Put at 4.3% : Study Sees Drop in Joblessness, Gains in Basic Industries

The U.S. economy will expand by a healthy 4.3% in 1985, the Commerce Department predicted Monday, with employment rising fastest in the production of electronics equipment and among service businesses such as computer and law firms and personnel agencies.

The department, in its annual industrial outlook report, foresaw business activity increasing steadily after a sluggish performance in the fourth quarter of 1984.

“We see the economy recovering in the first part of the year very strongly,” Deputy Commerce Secretary Clarence J. Brown said.

To Lag Behind 1984

Nonetheless, the projected 4.3% pace of expansion, if realized, would lag well behind the 1984 pace of 6.7%--one of the most impressive performances in the post-World War II era.

In the first six months of 1984, the economy was powered by a spectacular surge of growth as consumers spent freely and businesses went on an investment binge, spending billions to buy equipment and build new plants and offices. The growth in consumer spending slowed during the second half of the year, but business investment kept the recovery going at a modest pace.

Now, many analysts believe, production should resume accelerating almost immediately, sparked by the recent decline in interest rates. For corporations, it will become less costly to borrow money for expansion. And, among consumers, the lower interest rates should spur the sales of homes, automobiles and other items dependent on borrowed funds.

Year’s Jobless Rate

Unemployment, which averaged about 7.4% last year for the civilian work force, should dip to 7% this year, the Commerce Department said in its report. In November, the month for which the most recent jobless figures are available, unemployment was 7.2% among civilians and 7% for a broader measurement that includes members of the armed forces.

And the jobless rate should continue dropping through the end of the decade, falling to 5.8% by 1989, government experts predict.

The Commerce Department survey forecast that sales will increase in 177 of 209 manufacturing industries during 1985, with big gains expected in the production of electronics equipment, semiconductors, spacecraft and missiles, aircraft and measuring instruments. Moreover, it indicated, the economic recovery finally will spread to some basic industries that have been mired in recession for three years, including steel, copper and chemicals, where sales gains should exceed 10%.

Many independent economists concur with the government’s prediction of growth in the 4% range--although they tend to project somewhat lower figures than does the Reagan Administration.

In the automobile industry, output will expand by 4.4%, the department’s analysts said, assuming that restraints on imports of Japanese cars will be eased considerably or even eliminated this year. However, the Reagan Administration has not yet decided officially whether to ask the Japanese government to continue the restrictions on sales to the United States for another year.

During the last year, automobile output skyrocketed 19% as consumers who had postponed purchases during the 1981-82 recession regained confidence and reentered the market. The expected lower growth rate for 1985 “reflects some satisfaction of this pent-up demand,” the Commerce Department said.

But several manufacturing industries have troubled prospects, even in the face of the third straight year of business expansion. Footwear firms, for example, are suffering from import competition, turbine and generator sales are slumping because electric utilities are not ordering much new equipment, and paperboard boxes are being replaced by plastics, the report noted. It added that most “problem” manufacturing businesses--including cigarettes and cigars, meat packing and shipbuilding--have been in a long-term decline. By contrast, the service industries--which now account for 74% of total employment--will keep expanding their share of the American economy this year in a long-term trend toward white-collar jobs and away from blue-collar factory work, the Commerce Department said. Included in this broad category of services are wholesale and retail trade, finance, insurance, real estate, transportation, communications, utilities and government.

Expansion of Labor Force

“The majority of the services employment has come from the expansion of the labor force, particularly increased participation by women,” according to the report. “This growth has come in response to an increase in demand for consumer services, by the changing nature of international trade and especially by the rapidly growing demand by businesses for computer and data processing, accounting, marketing and other information services they once provided for themselves.”

Among the star performers, with the fastest growth rates over the last three years and continued bright prospects, are computer and data-processing activities, personnel supply services and legal services, the report said.

Other key service industries--major sources of jobs but expanding at a slower rate than the glamour fields such as computers--are restaurants and bars; hospitals, nursing homes and doctor’s offices, and hotels and motels.