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Joblessness Hits 6.1%, Worst Rate in 3 1/2 Years

TIMES STAFF WRITER

The nation’s unemployment rate jumped to 6.1% of the work force in December, its highest level in 3 1/2 years, the government reported Friday--confirming that the economy is in a recession that could continue for at least several months.

The Labor Department’s monthly survey showed the jobless rate up 0.2 of a percentage point from the 5.9% level of the previous month. The number of persons out of work rose to 7.6 million in December, an increase that was in line with what analysts had been predicting.

However, industry payrolls fell less sharply than had been expected, dropping by 76,000 last month, after a staggering plunge of 259,000 in November.

President Bush cited the December figures as evidence that the recession “will be shallow.” Bush told a press conference that “most people that have looked at the economy feel that . . . it will not be a deep recession.”

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Although top Bush advisers have insisted otherwise, the President hinted that he might include some new economic proposals in his State of the Union address on Jan. 29. “Wait and see what will be our proposals” then, he told reporters in a press conference.

Meanwhile, the Commerce Department reported that factory orders for manufactured goods plunged by 5.9% in November to $235.4 billion--the steepest one-month plunge since the agency began compiling the figures in 1958.

The drop more than wiped out a 2.5% increase recorded in October. Cynthia Latta, economist at DRI-McGraw Hill, a Lexington, Mass., economic forecasting group, called the report “just one more piece of evidence that the economy is in a recession.”

Although the December increase in the unemployment rate was not a sharp one, Janet L. Norwood, commissioner of the Bureau of Labor Statistics, said it underscored how far the economy has deteriorated since the downturn began.

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Since last June, when the economy began to weaken, the jobless rate has risen by 0.8 of a percentage point. And, in the three months since September, 515,000 jobs have been lost--the worse three-month decline since the recession of 1982.

Even so, some analysts were encouraged by the fact that the December statistics were not worse.

“The fact that not so many people lost jobs as in previous months is good economic news,” said Jerry Jordan, chief economist at First Interstate Bancorp in Los Angeles.

Irwin L. Kellner, chief economist at Manufacturers Hanover Trust Co. in New York, agreed. “It doesn’t mean we are not in recession,” Kellner said. “But it shows the economy is not in a free fall. . . . It should be average in scope and probably over by next summer.”

But Donald Straszheim, economist for Merrill Lynch Capital Markets in New York, argued that the fact that the figures were better than expected was not very comforting.

“The fact is, it was a bad number again,” Straszheim said. “Seventy-six-thousand jobs lost is a widespread decline, and it reflects an economy weakening from top to bottom. I think you will see Americans losing jobs right up to midyear.”

Friday’s report said that the bulk of the increase in unemployment last month occurred among would-be workers who were re-entering the labor force after having dropped out during the two previous months. The number of persons who lost their last jobs remained basically unchanged.

The jobless rates for most categories of workers rose slightly, following the trend for the economy as a whole. The unemployment rate for blacks remained unchanged at 12.2%, while that for Latinos rose sharply, to 9.3%, up from 8.6% in November.

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Some analysts speculated that the latest report might prompt the Federal Reserve Board to ease interest rates further during the next few weeks. The Fed already has pushed rates down three times in the last few months.

But First Interstate’s Jordan, a former member of the President’s Council of Economic Advisers, said he saw enough signs of resilience in the jobs report to doubt that Fed Chairman Alan Greenspan could afford to take strong action, particularly under threat of war.

“If Greenspan sees what I see, he may want to tread water for a while,” Jordan said. “But who can see out into February? I certainly can’t.”

In one contradictory note, the Labor Department reported that, despite the overall decline in the number of jobs in the economy, the length of the average workweek continued to increase in December. It rose to 34.6 hours from 34.2 hours the previous month.

In testifying before the congressional Joint Economic Committee, Norwood of the Bureau of Labor Statistics described the rise as “a puzzling development” that “is difficult to interpret.”

The job losses were especially sharp in manufacturing and services. The number of factory jobs in the economy, down about 900,000 since January, 1989, declined by an additional 33,000 in December, despite the recall of 20,000 auto workers from temporary layoffs.

The plunge in the construction industry, where unemployment now runs about 14%, continued, with the loss of 28,000 more jobs than would be normal in December.

And white-collar employment, which economists once thought was almost recession-proof, fell by 21,000, with another big drop in retail trades and business services. However, medical services and transportation both posted job growth.

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Separately, labor experts told Congress that, despite the rise in joblessness, the states were not experiencing serious shortages in the funds they have established to finance unemployment benefits.

Gary Burtless, a Brookings Institution analyst, said most state unemployment insurance trust funds are in a “relatively strong condition,” thanks to robust economic growth during the mid- and late-1980s.

He noted that a recent Labor Department analysis shows that “most states are entering 1991 with healthier reserves than was the case in 1980.”

The Commerce Department report on factory orders showed that much of the record 5.9% drop was due to declines in orders for transportation equipment--primarily autos and commercial aircraft. Excluding transportation items, orders in November fell 2%.

The key category of durable goods orders--items designed to last three or more years--plunged 10.7%, even worse than the 10.5% decline reported in preliminary estimates. Defense orders fell 23.4%, and prospective business spending on capital goods showed a huge 16.8% drop.

THE SOARING UNEMPLOYMENT RATE Unemployment Percent of work force, seasonally adjusted Dec. ’89: 5.3% Nov. ’90: 5.9% Dec. ’90: 6.1% Unemployment by Age/Sex October Adult Men: 5.2 Adult Women: 4.9 Teen-agers: 16.2 November Adult Men: 5.4 Adult Women: 5.1 Teen-agers: 16.4 December Adult Men: 5.6 Adult Women: 5.3 Teen-agers: 16.6 Unemployment by Race October Whites: 4.9 Blacks: 11.7 Latinos: 8.2 November Whites: 5 Blacks: 12.2 Latinos: 8.6 December Whites: 5.3 Blacks: 12.2 Latinos: 9.3 Here are the unemployment rates in December for 11 major industrial states as reported Friday by the Labor Department. California: 7.1%, up from 6.7% Florida: 5.5%, down from 6.3% Illinois: 5.9%, down from 6.0% Massachusetts: 7.4%, up from 7.0% Michigan: 7.3%, down from 7.7% New Jersey: 5.9%, up from 5.5% New York: 5.5%, up from 5.4% North Carolina: 5.4%, up from 5.1% Ohio: 5.8%, up from 5.5% Pennsylvania: 5.8%, down from 6.0% Texas: 7.2%, up from 7.0% Note: The overall unemployment rate does not include persons who have stopped trying to obtain work. The Labor Department estimated Friday that the number of these so-called “discouraged workers” reached 900,000 in December.


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