Jobs Growth Helps U.S. Recovery Pick Up Steam : Economy: Performance could threaten support for stimulus plan, but President insists it is still needed.

The slow-moving U.S. economic recovery picked up steam in February, with the number of jobs posting the largest monthly increase in four years, while unemployment continued its slow descent from last summer’s peak, the government reported Friday.

The unexpectedly strong figure for the growth in jobs suggests that the economy may be expanding at a rate sufficient to bring down unemployment without additional government assistance and threatens to undermine support for President Clinton’s $31.2-billion economic stimulus program.

The White House responded with a major effort to convince Americans that Clinton’s job creation package is still needed, while in Congress, Republicans pounced on the new numbers as further evidence that Clinton’s spending plans should be sharply reduced or eliminated.

“This good economic news is just another reason why we shouldn’t threaten the ongoing Bush recovery by adding . . . so-called stimulus spending to the deficit,” said Senate Minority Leader Bob Dole (R-Kan.), referring to the improvement that the economy began showing toward the end of George Bush’s presidency.

The unemployment report also sent shock waves through the financial markets. The Dow Jones industrial average jumped into an early rally of more than 34 points before falling back to close with a gain of just 5.67 points. Bond traders bid up interest rates out of concern that inflationary pressures may begin to increase.

The nation’s employers added 365,000 jobs in February, with unusually big gains in the recession-battered construction, retail and service industries. The increase was three times as large as economists had expected and far above the average job growth of recent months.

The Labor Department said that 8.9 million people were out of work, down from 10 million last June. Approximately 20% of the unemployed have been jobless for at least six months.

Nationally, the unemployment rate dipped to 7.0%, from 7.1% in January and a post-recession peak of 7.7% last June, the department said. But in California, which has been hit particularly hard by shrinking defense spending and soft real estate markets, unemployment increased to 9.8% from 9.5%.

The lingering economic slump in California hit Los Angeles County with particular severity, sending unemployment up to 11.2% from January’s rate of 10.4%, and returning the area to its highest level of unemployment since the recession began in the state in mid-1990.

The report showed that the largest job growth nationally came in the usually low-paying retail industry, where 131,000 jobs were added. Another 131,000 jobs in the service industry were created, many of which were temporary. Only one-fourth of the jobs created last month were in construction, where wages are much higher, and there was almost no growth at all in manufacturing jobs.

Mounting a public relations campaign to maintain support for his stimulus plan, Clinton said that unemployment remains “very high in our economy.” His plan, which would create an estimated 500,000 jobs next year, is made up of credits to cut taxes paid by businesses and increases in federal public works spending.

The President said that support for his program “depends on whether the members of the Congress listen to economists who have good jobs” or to people “who know what’s happening on the streets out there.”

Clinton’s comment notwithstanding, economists have stressed that the pace of job creation is lagging far behind that found after previous recoveries.

Maintaining that the increased federal spending is still needed, the President added: “How anybody could go to any state in this country, and particularly to some of those in real duress, and say that we’re in the midst of a strong recovery is a mystery to me.”

To bolster the Administration’s position, Labor Secretary Robert B. Reich emphasized at a news conference that much of the growth was in part-time and temporary jobs, while people would prefer full-time employment.

The new unemployment report came on the heels of news last week that in the fourth quarter of 1992, the economy grew at a solid rate of 4.8%. But advocates of the stimulus plan argue that this recovery is unlike any in the past.

Twenty-three months after the recession officially ended, only 47% of the jobs lost during the downturn have been recovered, compared with an average 247% job recovery at this point after other recessions in the post-World War II period.

Treasury Secretary Lloyd Bentsen acknowledged at the beginning of the week that strong job growth, coupled with the fourth-quarter growth in the economy, would force the Administration “to take another look” at the need for the stimulus package. But other Treasury officials said afterward that unemployment is often a volatile economic indicator and the report from one month would not by itself cause the White House to shift course.

The stimulus package has been one of the most controversial elements of Clinton’s economic plan, and even the President’s allies in the House and Senate displayed a degree of skittishness about supporting it in the wake of growing indications that the recovery is taking hold.

“If I vote to increase spending and then turn around to my farmers and say, ‘I’m going to have to cut you,’ I set myself up for all sorts of inconsistencies,” said Sen. Bob Kerrey (D-Neb.).

Reflecting the views of many other Democrats, Kerrey said that he favors some aspects of the package, among them additional spending on summer jobs for youths, the Head Start program that assists lower-income preschool children and welfare programs for women and children.

More difficult to justify, he said, are grants for waste-water facilities and transportation construction.

Most of those funds would go to state and local governments. Sen. Phil Gramm (R-Tex.) called them “a boondoggle of giveaways to the big-city political machines that helped elect the President.”

Arguing for his program, Clinton said during a picture-taking session with 35 mayors who were invited to the White House that “we are still about 3 million jobs behind where we would ordinarily be in a recovery.”

“The unemployment rate is still higher than it was at the very bottom of the recession.

“Will this stimulus program provide a summer job for every young person in South-Central Los Angeles that Mayor (Tom) Bradley is so concerned about?” Clinton asked. “Of course not, but it will sure send a signal that America is on the move again and coming together again.

“I mean, there are people who see . . . the employment rate dropped one-tenth of a point. That is not an enormous drop. These jobs were not all, or even most, full-time jobs. I am very grateful for it, but it seems to me that, if anything, the continued persistence of relatively high unemployment is a good argument for the stimulus package.”

But the improved economic numbers are making the task more difficult for the White House. Recent polls have shown strong public support for the specific spending that Clinton seeks, but the same polls also show public suspicion about spending in general and a desire to reduce the size of government.

One factor that may ease the Administration’s task is the continued uneven nature of the U.S. recovery--particularly the lack of job growth in California. White House spokesman George Stephanopoulos used the California numbers to defend the stimulus plan.

“California is about an eighth of the U.S. economy; its economy is larger than the economies of many countries, and America won’t fully recover until California also is in a full recovery that’s creating jobs,” Stephanopoulos said. “High unemployment in California is a matter of great concern to (Clinton), and it’s one of the reasons that he’s pushing so hard for the investments that he thinks are important.”

Times staff writers David Lauter and Karen Tumulty contributed to this story.