Jobless Rate Falls to 6.6%; Economy Seen on Upswing
The nation’s unemployment rate fell to 6.6% in January from 6.8% in December, the Labor Department reported Friday, as a buoyant economy created more than half a million additional jobs last month.
Although most economists were stunned by the second consecutive month of strong job gains, several analysts cited the latest report as further evidence supporting their earlier predictions that the economy would pick up steam in 1986 after 1 1/2 years of slow growth.
“The people who thought 1986 was going to be another weak year will be very surprised,” said Kathleen Cooper, chief economist at Security Pacific National Bank in Los Angeles. “These figures show a whole lot of strength in the economy for the months ahead.”
The number of people officially listed as out of work dropped to 7.8 million last month, falling below 8 million for the first time since President Reagan took office five years ago. And the total number of workers employed, including members of the armed forces based in the United States, rose to a record level of 110.6 million.
The Reagan Administration, under fire from some critics who think the White House forecast of 4% economic growth this year is far too optimistic, was clearly ebullient over the lastest job figures.
“This is the most solid evidence of all that the economy continues its rebound without letup,” White House spokesman Larry Speakes said. “More jobs and less unemployment is the best kind of economic news.”
In California, the civilian unemployment rate plunged to 5.8% in January from 6.7%, well below the nationwide civilian jobless rate of 6.7%.
But the unemployment rate in some large Midwestern states and in North Carolina rose, suggesting a further split in a two-tier economy, under which the Far West and the Northeast continue to prosper, while other areas--plagued by weak commodity prices and stiff foreign competition--lag behind.
The growth in jobs, based on figures adjusted to take account of normal seasonal variations, was particularly strong in the construction industry and at retail stores.
Helped by mild weather in most parts of the country, the construction industry picked up an estimated 157,000 jobs last month, suggesting that home builders finally are responding to lower interest rates.
Losses in Retail Sector
Jobs in the retail trade actually fell--as they always do after the Christmas season--but the decline was much less than expected, with the Labor Department estimating a gain in that area of 207,000 jobs.
“Employment usually declines sharply in January. This January the decline was much less than usual,” said Janet L. Norwood, head of the Bureau of Labor Statistics. “The number of wage and salary jobs in the non-farm economy expanded by 565,000 after seasonal adjustment.”
The bureau’s household survey used in determining the unemployment rate, which traditionally shows lower growth than the survey of business firms, estimated a large employment gain of 400,000.
Some analysts remained skeptical of the strong job figures, blaming inadequate seasonal adjustments for providing a misleading portrait of the actual employment situation.
But many who recently had been predicting only modest economic growth are now saying that the recent gains suggest that the economic recovery may still have a lot of life left in it.
‘Surprisingly Strong’
Calling the job figures “surprisingly strong,” Allen Sinai, chief economist at the Wall Street firm of Shearson Lehman Bros., acknowledged that “the dynamic in employment growth cannot be dismissed or excused away. At least a little bit of the resurgent economy the Administration talks about seems to be coming true.”
But Sinai warned that recent improvements still have left some sectors of the economy out in the cold. “Manufacturing, while firming, is still the weak sister of the U.S. economy,” he said.
The 6.8% unemployment rate last month was four percentage points below the 10.8% peak reached in November, 1982, just as the 1981-82 recession was ending. At that time, the jobless rolls totaled more than 12 million.
Blacks and teen-agers showed the largest improvement in January, with unemployment among blacks dropping by half a percentage point to 14.4%, and joblessness among teen-agers falling by 0.4% to 18.4%. But the bulk of the job increase in January occurred among adult men, the largest component of the work force. The unemployment rate among adult men dipped from 5.9% to 5.7%, and the jobless rate for adult women dropped to 6.1% from 6.2%.
‘Discouraged’ Group Down
The number of “discouraged” workers--those listed as out of work more than six months and no longer looking for work--fell to a four-year low of 1.1 million.
The job gains were particularly encouraging to those analysts who have been estimating that the economy would grow much faster than the consensus forecast, which generally expects growth of less than 3.5% in 1986.
“We were way out on a limb last year in predicting GNP (gross national product--the total output of goods and services) growth of 6% to 7%,” said Michael Bazdarich, an economist at the Claremont Economics Institute in California.
“But now I think the economy has clearly built up a head of steam and is going to surprise almost everybody,” he said. “I’m sure feeling a lot better these days.”
