Unemployment dropped to a 15-year low of 5.1% in February as employers created 289,000 jobs, the government said today in a report cited as evidence of a surprising, sustained vigor in the economy.
Too much vigor, Wall Street seemed to say, as stock prices fell on the Labor Department’s announcement. Analysts cited concerns that the Federal Reserve Board may raise interest rates to cool down the economy as employers bid up wage rates in an ever-tightening labor market.
Lowest Since May, ’74
A record 62.9% of the working-age population was at work last month, matching the high set in January, the department said.
The jobless rate, stuck at 5.3% or 5.4% for five months, fell 0.3 percentage point in February to 5.1%, its lowest since May, 1974. The last time the rate was lower was in December, 1973, when it hit 4.9%.
The gain of 289,000 nonfarm jobs in February reflected improved conditions in service-producing industries, such as health care and retail trade, according to a separate survey of business payrolls.
February’s job gains, although strong, were off from January’s huge increase of 415,000 jobs. Last month’s harsh weather cut 22,000 jobs from construction employment. Manufacturing jobs were down 8,000 after rising steadily since September.
Those decreases were more than made up for by a gain of 321,000 jobs in the service sector of the economy, including gains in health and business services and in retail trade.
Little Change Was Expected
Many analysts had been expecting unemployment to be stagnant or little changed last month, developments Wall Street would have taken as a sign the economic expansion was slowing down.
Wall Street is concerned because the economy has shown few signs of flagging despite a yearlong campaign by the Federal Reserve to dampen growth and restrain inflation by pushing up interest rates.
After today’s report, some analysts expect further credit tightening.
“Any way you look at it, this is more strength than the Fed’s going to tolerate and that means interest rates will be heading up,” said economist David Wyss of Data Resources Inc. in Lexington, Mass.
Daniel T. Van Dyke, senior economist at Bank of America in San Francisco, commented, “We’re adding jobs much faster than the labor force is growing. . . . The report portends more monetary tightening.”
Presidential spokesman Marlin Fitzwater called the drop in the unemployment rate good news. “Jobs are still the best barometer of a sound economy,” he said.
Labor Force Reduced
Overall, the labor force contracted by 247,000 people last month to 123.2 million, while 142,000 workers found jobs.
The commissioner of the labor statistics, Janet L. Norwood, told Congress that most of last month’s jobless decrease was among young adults and Latinos, groups whose jobless rates tend to be erratic.
The jobless rate among whites was 4.3%, down from 4.6% in January, while for blacks it was 11.9%, down from 12%.
The jobless rate for Latinos plunged to 6.8% from 8.4% in January.
The rate for teen-agers dropped by 1.6 percentage points to 14.8%, while the unemployment rate for young adults aged 20 to 24 fell 1.2 points to 8.1%.