Jobless Rate at 7%; Lowest in Five Years

The nation’s civilian unemployment rate, stagnant for six months, fell a dramatic three-tenths of a percentage point to 7.% in August, the government said Friday. It was the lowest jobless rate in more than five years.

About 310,000 jobs were created last month, the Labor Department said in a report that appeared to indicate that the long-stagnant economy may be picking up some steam. Indeed, jobless rates in every major population group except adult women fell.

President Reagan himself said the new report serves as “proof America’s economy is packing new power.”

But much of the overall jobless decline was in the volatile teen-age rate, which is prone to skew the overall calculation at the beginning and end of the school year. Because of that, analysts cautioned that overall job gains may not be as dramatic as they appear on the surface.

Teen-Age Rate Falls

Indeed, August’s jobless decline was concentrated among those aged 16 to 24. The rate for teen-agers fell 2.2 percentage points to 17.3%, while the rate for black teen-agers, considered the most volatile of all, dropped more than five percentage points to 34.5%.

Explaining the report, which confounded private analysts who had expected little if any improvement in a rate that had been stagnant for six months, Commissioner of Labor Statistics Janet L. Norwood told a joint congressional committee that, because of the volatility of the black teen-age rate, “additional data are needed to determine whether the August decline will be sustained.”

“I’ll wait another month to see whether this is for real . . . or just a statistical aberration,” Edward Yardeni, chief economist at Prudential-Bache Securities, said after Friday’s figures were released. He said he is notrevising upward his forecast that third-quarter growth will move along at an anemic 1% annual rate.

Yardeni pointed out that interest rates are up and that the dollar, reacting to skyrocketing U.S. auto sales, Friday hit its highest level in two months against major foreign currencies. A strong dollar is likely to worsen the U.S. trade deficit and higher interest rates would be a drag on the economy.

Yet Reagan was not so cautious, telling reporters that he was “delighted” at Friday’s report and adding:

“We can keep driving our unemployment rate down; we can keep opening up opportunities for our future, if all of us unite in working for an America where government does not grow, prosperity does.”

There were encouraging, substantive signs of economic growth:

--Manufacturing employment rose for the first time in 1985 and was up 37,000. Through the first seven months of the year, the economy had lost more than 200,000 manufacturing jobs, many in industries hard hit by foreign competition.

About 25,000 of the new manufacturing jobs were in the rebounding auto industry. Norwood even noted that “fewer than usual shutdowns for retooling to produce new model cars occurred” in August.

--The manufacturing workweek rose to 40.5 hours, its highest rate of the year.

--The pool of workers without jobs but seeking them fell by 324,000, the year’s biggest drop, to 8.1 million.

--Service jobs posted another solid gain with the addition of 235,000 jobs.

Within that category, business-service jobs rose 37,000. That area, which includes data processing and temporary help, had shown some weakness in recent months.

Health service jobs posted an additional gain of 36,000. Taken together, business and health service jobs have accounted for three of every 10 jobs created since the recovery began in December, 1982. In that time, more than 8 million jobs have been created.

Not since June, 1984, has the overall jobless rate fallen so sharply. And the overall rate has not been at the 7% mark since April, 1980, when Jimmy Carter was President.

The stubborn 7.3% civilian jobless rate had been considered unusually high for this stage of an economic recovery now more than 2 1/2 years old.

A companion unemployment calculation, which factors in the 1.8 million members of the armed services stationed in the United States, also fell 0.3% of a percentage point, to 6.9%.

The civilian labor force fell by 15,000 jobs to 115.29 million, a further reflection of the impact of youths going back to the classroom.

Among various segments of the population, the department showed these rates for August:

--Adult men, 6.0%, down from 6.3% in July.

--Adult women, 6.7%, up from 6.6%.

--Whites, 6.2%, down from 6.4%.

--Blacks, 14%, down from 15%.

--Latinos, 10.3%, down from 11.2%.

Economists are divided on the trend for unemployment the remainder of the year.

Joel Popkin, president of an economic consulting firm in Washington, sees a decline in the unemployment rate to below 7% in the next six months.

Popkin, who commented before Friday’s announcement, said that consumer spending will continue to be strong, due to low inflation rates and substantial gains in real income. His firm anticipates economic growth of about 4.5% from now through the middle of next year.

But Robert A. Gough, senior economist at Data Resources Inc., sees a slowly rising jobless rate through the first part of next year, with a 7.5% civilian level by November or December.