State Unemployment Rate Soars to 7.4%, Highest Level Since 1985 : Economy: California's number of jobless was estimated at 1.1 million in February. Last year at this time, 720,000 were out of work.

From Times Staff and Wire Reports

The California jobless rate soared to 7.4% in February--the highest level since October, 1985--but some economists say other employment figures released Friday may offer a glimmer of hope in an otherwise bleak economic picture.

The rate increased from 7% in January, meaning that another 60,000 Californians were out of work, bringing the total number of jobless to about 1.1 million, according to state figures. By comparison, 720,000 people were unemployed in February of last year.

The federal government also reported an increase in the national unemployment rate in February. As the recession deepened and the economy lost another 185,000 jobs, the national rate jumped to 6.5%, from 6.2% the previous month.

The new figures brought the total number of Americans out of work to 8.2 million, the highest level since March, 1987.

The jobless report prompted the Federal Reserve Board to inject more money into the financial system, thus nudging down the key federal fund rate--the interest that banks charge on overnight loans to each other. The new rate is 6%, down from 6.25%.

The Bush Administration has been applying heavy pressure to the central bank to lower interest rates as a way of getting the country out of the recession.

On Friday, Treasury Secretary Nicholas F. Brady told a Hartford, Conn., audience that he saw "plenty of room in the economy for lower interest rates and we continue to hope that that will be the case."

Although many expect the end of the war to boost consumer confidence and the economy, the effect has yet to be seen in many California industries. Manufacturing, for example, lost 10,000 jobs, and the retailing sector shrunk slightly from January but claimed more jobs than it did a year ago.

Despite the sharply higher unemployment rate, some economists said there were a few figures in the employment statistics that bode well for the state. Based upon wage and salary information provided by employers, the number of workers employed outside agriculture rose slightly to 12.9 million in February from the previous month.

Many industries that have shown heavy job losses in previous months also grew slightly or held their own in February compared to January. The construction field, which has lost more than 30,000 jobs during the last year, stabilized at about 644,900 jobs. The state's services sector also added more than 10,000 jobs.

"It may be that the economy may be more resilient than I realized," said David Hensley, who follows the California economy at the UCLA Economic Forecasting Project. "I want to stay with my gut feeling that the state is not out of the woods. But it's harder to make that case," given some of the employment figures.

"Having the war resolved on such a high note has been very good in the initial data that we have seen," said Leslie Appleton-Young, vice president of research and economics at the California Assn. of Realtors. "We are seeing fairly large gains in pending sales recorded by local boards of realtors.

"We will actually start to dig ourselves out in March and April," once sales have become final, Appleton-Young said.

The positive developments, however, provided no solace at a state Employment Development Department office in Los Angeles. Ildelisa Urena was completing her application for unemployment insurance after failing for six months to find work as a hotel housekeeper or seamstress. Her husband, a construction worker, found work only recently after five months of unemployment.

"I didn't think it would be this hard to find work," said Urena, 31. "It's hard right now; everything is so slow."

For Los Angeles-area aerospace workers, many of whom built the high-tech weaponry that pummeled Iraqi forces, finding work is "getting harder, much harder," said Ray Carillo, business representative for District 720 of the International Assn. of Machinists.

"I had a young lady laid off from McDonnell Douglas and she has been out of work for six months and she says it's very hard to find a job," Carillo said. "The companies are not really calling anybody back as far as we know."

Economists add that unemployment figures may continue to worsen before they improve.

"People are still frightened about the economic prospects," said Jack Kyser, chief economist at the Los Angeles Area Chamber of Commerce. "If people are unemployed and making demands on social services, you are not looking for much life in the retail sector and retail sales taxes. There are a lot of ramifications from these numbers."

The end of the war will not reverse all of the losses the economy has suffered since the Iraqi invasion of Kuwait last August, said Howard Roth, chief economist at Security Pacific National Bank.

"We are optimistic," Roth said. "But the end of the war won't get us back to July. A lot of people have lost their jobs."

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