January Unemployment Is Stable at 6.6% : Economy Starts 1987 Off Strongly With 448,000 New Jobs Reported
U.S. unemployment was unchanged at 6.6% in January, but the economy created 448,000 new jobs during the month for a stronger-than-expected start in the new year, the Labor Department reported Friday.
Analysts cautioned that the number of new jobs probably was inflated by aberrations in the survey, but even so, they said, there would have been a strong gain of about 200,000 new positions. The increase suggests that fears the new tax law would slow down the economy may be exaggerated, economists say.
“Job growth has been remarkably strong, more than the market expected,” said John O. Wilson, senior vice president and chief economist at Bank of America. “This is good news. It reinforces that the economy will be stronger in the first quarter than at the end of last year.”
Wilson said he expects the gross national product to grow at an annual rate of 2.2% during the quarter, contrasted with the 1.7% reported for the last three months of 1986.
Strong job growth has now persisted for five consecutive months. The reported 448,000 new payroll jobs represented the largest increase since February, 1984, and follow a healthy 225,000 increase in December.
Considering the sizable influx of new job-seekers into the work force, “the unemployment rate did very well to stay at 6.6%,” said Allen Sinai, chief economist for Shearson Lehman Bros.
Seventh Month Below 7%
At 6.6% unemployment for the whole population--6.7% if members of the armed services living in the United States are not counted--the economy has now managed its seventh consecutive month with total unemployment below 7%, the level at which it had been stalled for much of the current recovery.
In California, unemployment of all civilians fell sharply from December’s 6.7% to 6.2% after seasonal adjustment.
Sinai, remarking on the favorable job news, said Shearson will probably raise its forecast of economic growth during the first three months of the year from a weak 2% to 2.2% or even 2.5%.
Inflating the January job growth were a statistical aberration in the seasonal adjustment for layoffs after the Christmas retail season and the fact that the weather Jan. 11-17, the week during which the survey was conducted, was unusually mild. The latter factor meant that the reported increase of 140,000 construction jobs after seasonal adjustment was probably higher than was the case later in the month.
A more reasonable estimate of the job growth “would still be easily 250,000,” Sinai said. “ . . . I think this is an unambiguous big positive in its signal for the prospects of the economy.”
Martin Mauro of Merrill Lynch took a more pessimistic view, estimating that the adjustment would bring the job growth down to 150,000, “which is respectable, if not robust.” He added, “It doesn’t point to any big . . . turnaround, but it certainly shows that fears that the new tax bill would force a recession are unfounded.”
Of the 448,000 new jobs reported, two thirds were in services. by the 250,000 business establishments surveyed, more than two thirds--314,000--were in services.
