5.7% Jobless; Employment Gains Decline
The politically sensitive unemployment rate remained at a Reagan-era low of 5.7% in January, the Labor Department reported Friday, but a meager increase in payroll jobs added to expectations of weak growth for the economy in the early months of 1988.
The nation’s powerful job-generating machinery slowed to a crawl last month as business and government put only 107,000 additional people to work on a seasonally adjusted basis, compared with job growth averaging almost 390,000 from October through December.
Divided Economic Outlook
The employment report, eagerly awaited as the first important indicator of the country’s economic pulse as it enters a presidential election year, left analysts still sharply divided over whether the economy is going through a brief period of slower growth or preparing to fall into recession in response to a retrenchment in consumer spending.
“Some people will see this as a prelude to recession,” said Allen Sinai, chief economist for the Boston Group, “but I’m more inclined to see it simply as a pause before growth resumes in the second quarter.”
By contrast, Irwin L. Kellner, chief economist at Manufacturers Hanover Bank in New York, continued to predict a recession this year but acknowledged that the employment picture looks stronger than he expected.
“This was one of those mixed reports where you can’t tell whether the glass is half empty or half full,” Kellner said. “But I have to admit I was surprised it wasn’t worse.”
Interest Rates Fall
On Wall Street, interest rates fell and the bond market gained ground as investors were buoyed by the indications of sluggish growth, which they interpreted as increasing chances that the Federal Reserve will move to ease credit in hopes of stimulating spending and keeping the nation’s 5-year-old economic expansion alive.
The job statistics “confirm the market’s suspicions that the Fed needs to ease and that there is little to prevent it from deciding that it is time to help kick the economy out of its doldrums,” said Mickey Levy, chief economist at Fidelity Bank in Philadelphia.
Total employment in the United States hit 115.9 million in January, compared with 7 million unemployed. The nation has added 3.1 million jobs since January, 1987, and reduced unemployment by more than 900,000.
2 Million More Jobs
Most analysts expect the economy to generate at best about 2 million additional jobs this year--roughly in line with the increase in the labor force--leaving unemployment at its current level or slightly higher in the months leading up to November’s election.
“As a whole, we’re not going to get further improvement in the rate,” economist Sandra Shaber of the Futures Group, a consulting firm here, predicted. She added that the jobless rate might bounce up to 6.2% or 6.3%, “but I don’t think it’s going to average that high.”
Manufacturing employment, which had been growing by an average of 70,000 a month recently, managed to eke out a 25,000 gain in January, despite modest weakness in the auto and steel industries.
One sign of continuing strength in manufacturing was a modest increase to 41.1 from 41 in average work hours of manufacturing workers. Overtime for production workers remained at a historically high average of 3.9 hours a week.
Some analysts, citing several weeks of sharp increases in the number of initial unemployment claims through the middle of January, contend that possible errors in the survey may have overstated even the relatively modest job gains reported for last month.
Suspicious Output Figures
“I’m a little suspicious of the manufacturing numbers,” said David Levine, chief economist at Sanford C. Bernstein & Co., a New York investment firm. “They suggest industrial production continued to advance in January, but I still expect it to be flat.”
Levine, expecting a rebound in spending to help the economy recover from a temporary slump early this year, was particularly encouraged by the healthy 0.5% gain in average hourly earnings.
The nation’s civilian unemployment rate, which does not include members of the armed forces, also remained steady in January at a seasonally adjusted 5.8%. The jobless rate is derived from a separate survey of households, in which about 385,000 people said they had found work last month and 68,000 said they lost their jobs.
Janet L. Norwood, the commissioner of labor statistics, told a congressional committee that the surge in the household survey “brings the gain over the last four months in line with the business (payroll) survey,” which is generally more reliable on a month-to-month basis.
Non-farm businesses added an estimated 174,000 jobs to January payrolls, but a drop in government employment of 67,000 held the overall monthly gain to the smallest increase since June, 1986.
Jobless Rate Dips in State
In California, where nearly one-eighth of the nation’s workers are employed, the civilian jobless rate continued to decline, to 5.1% from 5.2% in December.
Unemployment among the nation’s whites rose slightly to 5% from 4.9%, while the jobless rate for blacks remained unchanged at 12.2%. Unemployment among Latinos fell sharply, to 7.2% from 8.1%.
