Jobless Rate 5.4%, Lowest in 14 Years : April Decline, Hiring Surveys Evoke Differing Views on Course of Inflation
The nation’s unemployment rate declined in April to 5.4%, its lowest level since June, 1974, the government reported Friday.
“This is a good sign that the economy is chugging right along, and it’s not necessarily a sign of overheating,” said Irwin L. Kellner, chief economist for Manufacturers Hanover Bank in New York.
The overall unemployment rate, including not only civilians but also members of the armed forces, had been 5.5% the previous month and 6.2% in April, 1987.
Economists were cheered not only by the decline but also by a separate survey, based on employer payrolls, that showed only 175,000 new jobs were created in April. That was the lowest rate of job creation since last September and allayed fears of many economists that a tighter labor market would fuel inflation.
Stocks Continue Slide
At the same time, investors apparently felt the April employment picture presented another piece of evidence that the Federal Reserve would soon have to raise interest rates to combat inflation. Interest rates rose in the bond markets, and the stock market declined for the third consecutive day. The Dow Jones Industrial Average fell 12.77 points.
The Reagan Administration welcomed the news that the unemployment had fallen below the best month of Jimmy Carter’s presidency--the 5.6% rate recorded in May, 1979--and reached a level not seen since the Gerald R. Ford Administration. April’s 5.4% rate was half the 10.8% in November, 1982, the end of the deep recession of the first two years of the Reagan Administration.
“The good news on the economy continues,” President Reagan said during a photo session in the White House. “Unemployment is the lowest it’s been since 1974, and the proportion of our population working is at an all-time high.”
Reagan pointed out that 62.3% of working-age Americans had jobs in April, the highest level in history.
By and large, economists found little to quarrel with in Reagan’s assessment.
David Wyss, an economist with Data Resources Inc., a forecasting firm in Lexington, Mass., noted that fully one-quarter of the new jobs--some 45,000--were in manufacturing, where employment has generally been lagging.
Auto Layoffs Have Impact
Winter layoffs in the auto industry had depressed manufacturing employment in February and March, when most job growth occurred in the service and construction sectors.
Allen Sinai, chief economist at the Boston Co., said the economy “is moving into a world different from what we have seen in the past seven or eight years. In the labor markets, in manufacturing, we are moving into boom-like times. We are in a strong industrial economy such as we have not seen at least since 1980.”
Wyss and Sinai differed over the inflationary impact of the new employment data--and the implications for higher interest rates.
Wyss said the rate of job growth was only mildly inflationary. Consequently, he predicted that the Fed would refrain from its most drastic anti-inflationary tool--increasing the discount rate, the interest rate it charges banks. Instead, he said the Fed would probably move cautiously over the next few months by “snugging up” other short-term interest rates.
Sinai, on the other hand, cautioned that high employment would lead to higher wages and said he expected the Fed to move within a month or two to drive interest rates up and cool the economy.
“If it works, and a higher discount rate in June is all that happens, it’ll be forgotten by November,” Sinai said. In that case, he said, the presidential election will not be influenced by rising inflation and interest rates.
And, in the meantime, he said: “This is terrific news for a lot of Americans: More of them are working and more of them are getting more wages. The cost is higher inflation and higher interest rates, but for the time being that will seem a small price to pay.”
Retail Jobs Lag
Friday’s report from the Labor Department showed that while factory jobs surged last month, employment lagged in retail stores. Construction jobs also slowed after an unusual midwinter spurt.
The April unemployment rate for civilians, excluding members of the armed forces, was also 5.4%, down from 5.6% in March. Civilian unemployment in California increased marginally to 5.1% in April from 5.0% in March.
Total civilian employment reached a record 114.7 million in April, according to the Labor Department’s survey of thousands of households. That represented an increase of 610,000 jobs--a much higher figure than detected by the separate survey of employers. For a host of reasons, the two surveys often produce startlingly different figures, but economists generally regard the employer survey to be a better guide of economic activity.
The number of jobless Americans fell by about 200,000 in April to 6.6 million, according to the survey of employers.
Scarcity Still Exists
Despite the declining overall unemployment rate, Janet L. Norwood, chief of the Labor Department’s Bureau of Labor Statistics, told the congressional Joint Economic Committee that fully 5.2 million Americans who wanted full-time jobs could only find part-time work in April.
She added: “We still have a disturbingly large concentration of people who have been looking for work for more than six months--800,000.”
Among civilians, unemployment among adult men fell from 4.9% in March to 4.6% in April. Unemployment among adult women--53.9% of whom are now in the labor force--remained at 4.8%.
Except among Latinos, whose jobless rate nationwide jumped by 1.1 points to 9.3%, the April data showed no major changes in the jobless rate for the main categories of adult workers. The April unemployment rate for teen-agers was 15.9%, but unemployment among black teen-agers was 31.4%, down from 36.9% in March and 37.1% a year ago.
A 14-YEAR LOW Peaks and valleys in the nation’s civilian unemployment rate since June, 1974. (Intervening years not plotted) June 1974: 5.4% May 1975: 9.0% May 1979: 5.6% July 1980: 7.8% Nov. 1982: 10.8% April 1988: 5.4% Source: Labor Department
