Major Banks Drop Prime; Jobless Ranks Up 400,000 : Increase Largest in 6 Years

The nation’s unemployment rate soared from 6.7% to 7.3% in February, the largest monthly gain in nearly six years, the Labor Department reported today.

Bad weather in agricultural areas of California, a slumping oil industry in Texas and manufacturing layoffs in Illinois accounted for nearly two-thirds of the 0.6% surge that saw 400,000 people join the ranks of the jobless, department analysts said.

The magnitude of the jump surprised government and private analysts alike. Beryl W. Sprinkel, chairman of the President’s Council of Economic Advisers, called the increase “bad news” but said it should not be viewed “as a trend but merely as an aberration.”

Sprinkel joked that when the news was made available to government officials late Thursday, his phone “rang off the hook” with calls from White House policy-makers, asking him to explain the bad news before television cameras this morning. He noted that he is not asked to comment on good news.

‘Simply Not Believable’

Economists generally predicted that the jobless rate will soon return to a level of at or near 7%.

“The February jump in unemployment is simply not believable,” said Jerry J. Jasinowski, chief economist for the National Assn. of Manufacturers. “Employment has been exhibiting slow but steady gains. I think we can expect unemployment declines to return in the months ahead.”

President Reagan said he agrees that the report does not reflect the true state of the economy, claiming that “the great part of this is due to the weather that we had.” He cited flood damage, particularly in the West.

The February increase returned unemployment to the level that prevailed for the first six months of 1985 and abruptly reversed the gradual decline that began last August.

Half in Agriculture

Employment overall fell by 400,000 in February, erasing a gain of the same magnitude in January. Half the January-February drop was in agriculture, again reflecting the impact of the weather.

The decline left total employment at 108,561,000, while the total of the unemployed stood at 8,527,000.

Government analysts cautioned against reading too much into the February rise because two-thirds of it was concentrated in three states.

Unemployment in California alone rose from 5.8% to 7.2% in February. In Texas, where the drop in world petroleum prices has forced layoffs in the oil industry, unemployment rose 2 percentage points to 8.4%.

Electronic Problems

Continued problems in electronic equipment manufacturing also accounted for some of the job declines in Texas as well as California.

And in Illinois, unemployment stood at 9.5%, up from January’s 7.7%. Layoffs in the import-battered manufacturing industries accounted for much of the Illinois increase, analysts said.

Construction jobs fell by 25,000 in February, in large part the result of the return of severe winter weather.

Reflecting the job weakness in California and Texas, unemployment among Latinos surged 2.2 percentage points to 12.3%.