Unemployment Drops to 7% : Lower Interest Rates Boost Job Market

Plunging interest rates and oil prices began showing up favorably in the job market last month, helping create 205,000 new jobs to offset the continuing ill health of smokestack industries and modestly reducing unemployment to 7.0%, the federal government reported Friday.

Despite the loss of the 60,000 jobs in manufacturing and oil and gas industries, a housing boom triggered by the lowest mortgage rates this decade raised construction, real estate and finance employment by 130,000 in April, the Bureau of Labor Statistics said.

With 8.3 million people still seeking work--about the same level as a year ago--officials said the one-tenth of a percentage point drop from the March jobless rate of 7.1% represents little change in the overall labor market.

But even that small dip helped relieve fears that triggered a large upsurge in joblessness two months earlier. Experts had worried that the nearly 3 1/2-year-long recovery from the last recession had become stalled.

“There was a weakening in the economy earlier in the year, (but) I think that’s past us,” Bureau of Labor Statistics Commissioner Janet L. Norwood told the Joint Economic Committee of Congress. “What we’re seeing is small and rather slow growth, but it is growth.”’

In the last four months, the economy has created 1 million new jobs, rising to an all-time high of 110,587,000 people at work, the bureau said. Population trends also are beginning to help put a glow on the figures, with the labor force growing by only 29,000 people in April after rising a total of 1.7 million the previous 12 months.

However, a couple of what Norwood called “troubling aspects”-- one new and the other with a long-term history--clouded the favorable developments.

Nearly 1.1 million so-called “discouraged” workers have given up even looking for jobs. And the number of people working part time, but not out of choice, shot up by 385,000 in April to 5.9 million, the highest level in more than two years.

“Most of the increase occurred among workers whose hours had been cut back,” Norwood said. “If that continues, it is a matter of very great concern.”

In addition, another 25,000 jobs in manufacturing and 35,000 in the oil and gas industry disappeared last month, raising to 166,000 the number of jobs lost in those two sectors of the economy since January.

A total of 240,000 factory jobs have vanished since the height of the current recovery 15 months ago. And declining oil prices have so sharply reduced new drilling that one of every eight jobs in the petroleum industry has been lost in just the last three months.

“Manufacturing has regained less than 60% of the jobs lost during the 1982-1983 recession,” Norwood said. “Six of the 21 industries--metals, tobacco, textiles, leather, chemicals and coal and petroleum products--actually have employment below levels of those at the trough of the recession in 1982.”

Gain of 45,000 Jobs

On the positive side, employment in the overall services sector rose by 85,000 last month, including a gain of 45,000 jobs in finance, insurance and real estate business reflecting the boom in mortgage financing brought on by falling interest rates.

The drop in home mortgage interest rates from 13% a year ago to a nationwide average of 9.86% last week, combined with unusually good weather, created 85,000 new construction jobs last month.

Lyle Gramley, chief economist for the Mortgage Bankers Assn. and a former member of the Federal Reserve Board, said the drop in oil prices has helped ease fears about inflation and also stimulated consumer spending on other items.

“We are beginning to get some of the benefits of declining oil prices but, thus far, the negatives still outweigh the positives,” he said, referring to the large joblessness in the oil states of Texas, Oklahoma and Louisiana.

Car Production Down

“Declining auto production and drilling activities are the two biggest problems this quarter, but both of those will be behind us the second half of this year,” Gramley said. “The oversupply of automobiles relative to sales can be worked off in four or five months.”

Donald Walls, an economist for Data Resources Inc. of Lexington, Mass., said the lower oil prices are a “boon to traditional smokestack industries” and could produce a net 1.3 million new jobs in the next four years.

The Bureau of Labor Statistics said an alternate unemployment rate, which includes only civilian joblessness, also fell one-tenth of 1% in April, to 7.1%.

The official index combines the civilian labor force with the nearly 1.7 million members of the armed services stationed in the United States.

But teen-age unemployment jumped sharply, from 18.2% to 19.6%.

For other population groups, the bureau reported these figures:

--Whites, 6.1% in April, down from 6.2% in March.

--Blacks, 14.8%, up from 14.7%.

--Latinos, 10.4%, up from 10.3%.

--Black teen-agers, 42.6%, down from 43.7%.