Unemployment Rate Unchanged at 7% but Job Growth Is Strong

Times Staff Writer

The overall unemployment rate remained unchanged in October at 7%, the Labor Department reported Friday, but job growth was up strongly and the hard-hit manufacturing sector registered a gain in employment for just the second time this year.

The new economic information, the first available for October, only added to the sharply divergent viewpoints among economists. Some analysts heralded the job gains as good news for the future, but others predicted more sluggish growth and even a boost in the jobless rate next year.

“The economy is growing just fast enough to keep its head above water,” said Robert Gough, a senior economist at Data Resources in Lexington, Mass., who forecast a rise in the unemployment rate to about 7.5% by the middle of 1986. “And when you’re just treading water, there’s no room for error. If anything goes wrong, the economy could slip under the surface.”

In contrast to such predominately pessimistic forecasts, however, other analysts are convinced that the economy is on the verge of a resurgence after more than a year of weak growth.


“We are ripe for an economic boom,” said David Levine, chief economist at the Wall Street investment house of Sanford C. Bernstein & Co.

Output Lagging Demand

With output now lagging behind consumer demand, Levine argued, “business will be compelled to hire more people and increase production just to keep its already lean inventories from falling further.”

The number of non-farm payroll jobs, a figure that usually moves in close step with the overall performance of the economy, rose by 414,000 in October to 98.5 million--the largest monthly jump in employment this year.


Gains were widespread, with the nation’s manufacturing industries even showing an increase of 60,000 jobs last month to 19.33 million. Except for August, employment in manufacturing had fallen every previous month this year, and the boost in October still left the number of manufacturing jobs 270,000 below January’s level.

Civilian employment, as measured by a survey of households, hit another record last month at 107.9 million.

Despite the increase in jobs, unemployment among civilians held steady at 7.1% because of the flow of a large number of new entrants, mostly women, into the labor force. The civilian unemployment level has remained remarkably stable for most of the year, ranging from a high of 7.4% in January to a low of 7% in August.

In California, the civilian unemployment rate rose slightly to 7.7% last month after bouncing up sharply in September to 7.6% from 7.3% in August. Unemployment among adult women fell 0.4 percentage points last month to 6.4%, but teen-age joblessness rose sharply to 20.1%.


Administration Encouraged

The Reagan Administration, encouraged by the big gain in jobs, predicted that the nation was finally emerging from its economic doldrums.

“The rise in employment is a clear signal that rapid expansion is under way,” White House spokesman Larry Speakes said, “adding yet another indicator of substantial, sustainable growth in the fourth quarter.”

But even if the economy picks up speed this fall, economists said, it should fall well short of the 3% annual growth rate that the White House is still predicting for 1985.


And many analysts believe the economy will continue to struggle. “There may be some gains, but the economy is hardly roaring ahead,” said Martin Mauro, a senior economist at Merrill Lynch Economics in New York. “Don’t look for more than a hair’s improvement in unemployment through the close of 1986.”

But, while the majority of economists see little change ahead in the economy, a growing minority of analysts are becoming more optimistic.

“This recovery still has a lot of life left in it,” said Irwin Kellner, an economist at Manufacturers Hanover Trust in New York. “Economic expansions are not like old soldiers--they don’t just fade away. They usually die only when policy-makers worried about rising inflation decide to kill them, and the Federal Reserve is not about to do that as long as inflation is nowhere in sight.”