Jobless Rate at 14-Yr. Low as Exports Put More to Work : Rising Pay Spurs Fears of Inflation
Unemployment fell in April to 5.4%, the lowest it has been since 1974, with export-sparked hiring on factory assembly lines leading the latest spurt of new jobs, the government said today.
The number of Americans at work rose by 606,000 last month while those listed as unemployed fell by 191,000 to 6.6 million, dropping joblessness 0.2 percentage points from March’s rate of 5.6%, the Labor Department said.
(California’s jobless rate rose slightly to 5.1% in April from 5% in March despite the addition of 90,000 workers to payrolls last month, labor officials said. The slight unemployment rise was attributed to seasonal adjustments.)
Lowest Since June, 1974
The national unemployment rate was the lowest since June, 1974, when it also stood at 5.4% at a time when the nation was well into a steep recession, in contrast to the current economic expansion.
“One of the best barometers of the state of our economy is to see more people working,” President Reagan said in reaction to today’s report. “The good news . . . continues. The economy continues to grow at a moderate pace, and inflation is under control.”
Private analysts agreed, although some of them repeated assertions they have been making since last September--when the jobless rate first dipped below 6%--that the tighter labor market is bound to push wages up soon and exert inflationary pressures on prices as well.
“We have reached the zone of full employment when the jobless rate is so low that wage inflation starts accelerating, and it clearly is now,” said Allen Sinai, an economist for The Boston Co., a New York financial consultant.
The Labor Department said in its report on the job market that the average hourly wage nationwide in April rose to $9.22, a nickel over March, for an average annual increase of 5.6%. That is twice the 2.8% average increase in hourly wages for all of 1987.
Other economists, however, said the wage gains are still not big enough to trigger a tightening of credit by the Federal Reserve Board through higher interest rates in an effort to cool off the economy.
Fears Called Overstated
“The fears of an inflationary boom are overstated,” said Larry Chimerine, president of the WEFA Group of Bala Cynwyd, Pa., an economic consulting firm. “I don’t think it will get out of hand. Manufacturing is strong, but other areas of the economy such as services, retailing and construction are showing some weakness.”
Richard Rahn, the U.S. Chamber of Commerce’s chief economist, said it is a myth that low unemployment causes inflation.
“The opposite is more often the case,” he said. “Since 1950 we have had 15 years when unemployment was at or below today’s rates. The average inflation rate in those years was 3.6%. During the other 23 years when unemployment was above today’s number, inflation was a dramatic one-third higher or 4.8%.”
Growth in new factory jobs, which had been sluggish the previous three months after rising dramatically in 1987, accounted for more than one-fourth of the 175,000 increase in employers’ payrolls in April.
Leading the surge were export-related industries such as machinery and fabricated metal products. But production jobs in the U.S. auto industry also climbed by 10,000, reversing wide-scale layoffs in January and February.
Michigan’s unemployment rate dropped from 8.3% to 7.4%, as did joblessness in several other states whose economies are heavily dependent on manufacturing.
And nearly all of the jobless decline in April was among adult men, who are more likely than women to work on the goods-producing side of the economy as opposed to the service sectors.