Oil, Car Slumps Push Jobless Rate to 7.2%

Times Staff Writer

Job losses in the troubled oil industry and among auto companies helped push the overall unemployment rate up 0.2 of a percentage point to 7.2% in May, but services and housing construction stayed relatively strong, the Labor Department reported Friday.

Key sectors of the economy remained on the sharply divergent paths they have followed for several months, as a booming housing industry and robust consumer spending contrasted with a bleak outlook in the oil fields and a lack of improvement in manufacturing.

‘Split Personality’

“The employment numbers show an economy with a split personality,” said Jerry Jasinowski, chief economist for the National Assn. of Manufacturers.


Compared with last May, the jobless rate remained unchanged at 7.2%--evidence that the U.S. economy has failed to improve enough over the last year to cut into the ranks of the unemployed.

The economy showed signs of growing, but at a sluggish pace that was not fast enough to employ the estimated 430,000 people who joined the civilian labor force last month. As a result, the number of jobless workers rose by 210,000 in May to nearly 8.6 million. Job losses were concentrated among adult men.

The non-farm economy added about 150,000 jobs to reach 99.9 million payroll employees, with employment in service industries rising by 200,000 jobs in May, while oil and gas drilling lost 30,000 workers and manufacturing posted a loss of 40,000 jobs, half of the drop concentrated in the auto industry.

“The apparent paradox in the economy is strong housing and retail sectors continuing side-by-side with weakness in the industrial heartland,” said Allen Sinai, chief economist at Shearson Lehman Bros., a New York investment firm.


“What seems to be happening is that we are at the early stages of expansion from the dismal performance of the economy we’ve seen for more than a year,” Sinai added. “The economy didn’t actually go through a recession last year, but it was sure a good imitation of one.”

The nation’s civilian unemployment rate, which does not include members of the armed forces, also rose in May by 0.2 of a percentage point, to 7.3%.

In California, the jobless rate fell slightly to 6.7% from 6.8% in April. A year ago, unemployment in California was 7.2%.

Although the split economic pattern is likely to persist for several more months, most analysts remain convinced that the economy should pick up speed in the second half of the year.


Recovery ‘Chugging Along’

“We should see an improvement in the second half, although there are some problems with the tax reform bill that could slow things down,” said Richard Rahn, chief economist at the U.S. Ch1634558565hits it, it seems that this recovery keeps chugging along. It’s just like the little engine that could.”

At the White House, which has been counting on 4% economic growth to help shrink the federal deficit next year and avoid the deep cuts in defense and certain domestic programs called for by the Gramm-Rudman budget-balancing law, officials did their best to paint a good picture of the unemployment report.

“We expect to see continued employment gains in the 200,000 to 300,000 range over the entire second half of this year,” White House spokesman Larry Speakes said. “At the same time, we do not expect to see a repeat of the 422,000 workers added to the labor force. Work force increases should drop to a more normal level of about 150,000.”


The Administration forecast calls for the civilian unemployment rate to average 6.7% for 1986. So far this year, civilian unemployment has been been above 7% every month except January, when it briefly fell to a low for the Reagan years of 6.7%.

Private economists agreed that the big jump in the number of people entering the labor force may be exaggerated somewhat by problems with adjusting the statistics for seasonal variations. Large numbers of students leave school in search of jobs in May and June, making it difficult for government analysts to correctly estimate the unemployment figures.

Hardest hit by the job losses in energy and manufacturing were the states of Michigan and Texas, where unemployment rates jumped respectively to 9.8% from 9.2% and to 9.6% from 8.5%.

The jobless rate for adult women, which traditionally has been higher than that for adult men, nearly closed the gap, with unemployment among women at 6.5% last month compared with a 6.4% rate for adult men. The unemployment rate for blacks was unchanged at 14.8%, and joblessness among Latinos rose to 11% from 10.4%.


The number of people who wanted to work full time but could only find part-time work remained at the relatively high level of almost 6 million workers.