Jobless rate at worst level in 5 1/2 years 8.9 million are without work, figures show

January 11, 1992|By Robert D. Hershey Jr. | Robert D. Hershey Jr.,New York Times News Service

WASHINGTON -- The nation's unemployment rate climbed to a 5 1/2 -year high of 7.1 percent in December, with the bulk of the rise occurring among people discharged from their latest job with little prospect of recall, the Labor Department reported yesterday.

The ranks of those out of work swelled by 289,000, to 8.9 million, the highest in nearly eight years. And the number of people out of work more than six months rose by 148,000, to 1,471,000.

As discouraging as much of the report was, however, many private analysts said it did not point to significant fresh deterioration in the economy last month but mainly reflected a continued lack of growth.

"What it tells you is that the economy is stagnant," said Neal M. Soss, chief economist for First Boston Corp. "There's no sense of improvement."

One relatively bright spot in the report was a modest but unexpected rise in payrolls, which grew by 31,000; analysts had expected payrolls to shrink by more than twice that amount.

All the gain, however, was in government rather than private payrolls. The latter would more accurately reflect economic conditions.

Other pluses were a slight increase in the length of the average workweek, an increase in the proportion of industries adding workers rather than shedding them and a rise in the index of production working hours.

Overall, yesterday's figures appear to have reduced pressure on the Federal Reserve to cut interest rates further, or at least not to have intensified the Fed's concern.

In fact, Federal Reserve Chairman Alan Greenspan told Congress yesterday afternoon that he expected the steep cut in interest rates the Fed ordered last month to be sufficient to get an economic recovery started and that he did not foresee a need for further rate cuts or for budgetary stimulus.

(Mr. Greenspan tried to assure Congress by repeating past statements that the Fed is closely monitoring economic developments and will do more if necessary to spur demand by lowering interest rates, the Associated Press reported.

(However, he resisted efforts by Senate Democrats who tried to extract a specific pledge for more dramatic movements to reduce rates.)

President Bush, returning from his business-oriented trip to the Far East, called the December results disappointing, and congressional Democrats pounced on the report to assert administration mismanagement.

"It is alarming that joblessness is still rising so sharply in the second year of this Republican recession," said House Majority Leader Richard A. Gephardt, D-Mo. "The surge in unemployment shows why the president cannot pose for photo opportunities with the Japanese and cut the capital gains tax for the rich if he wants to get the economy moving again.

"We need a far-reaching program to revive the economy and help middle-income Americans."

From the Senate, Majority Leader George J. Mitchell, D-Maine, said, "Not only is this 19-month-long recession the most prolonged since the Second World War, it's becoming one of the most painful for working, middle-income people."

Rep. David R. Obey, D-Wis., said the higher jobless rate showed that extended jobless benefits should continue at least until autumn.

Yesterday's was the first monthly labor-market tally taken since enactment of legislation under which benefits for about 3.1 million people who have exhausted them since last March have been extended for up to 20 weeks. Normally, the jobless are covered for no more than 26 weeks.

Thomas J. Plewes, an associate Labor commissioner, said he could find no visible effect, such as an increase in workers re-entering the work force or a decline in so-called discouraged workers, that could be traced to the extension.

Although extending benefits may lessen pressure on the jobless to find a job, the existence of the benefits acts as a lure for people to collect them, which requires statements that one is looking for work. Those who are not searching for work are not counted as unemployed.

The new job hunters increased the labor force by 245,000 in December, while 44,000 workers lost their jobs or quit, raising the ranks of the unemployed by 289,000. At 8,891,000, the jobless total is the highest since January 1984, when it was 9,008,000.

Before last month, the unemployment rate had held at about 6.8 percent from May through September before edging up to a revised 6.9 percent in October and November. Various indicators show that a recovery from the recession has now stalled, despite rising gross domestic output for the second and third quarters of 1991.

Since the onset of the recession, the jobless rate has increased 1.7 points and the number of people out of work has risen by 2.1 million.

The December increase in the unemployment rate was the first clear rise since May, since changes of one-tenth of a percent are considered statistically insignificant.

"I find little in this report that would suggest we're coming out of this recession," said Norman Robertson, chief economist for the Mellon Bank in Pittsburgh.

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