Unemployment Rate Drops to 14-Month Low

WASHINGTON — The economy paused for breath in April, creating a scant 2,000 new jobs, but the unemployment rate dropped to its lowest level in 14 months as fewer people moved into the labor force seeking work, the Labor Department reported Friday.

The figures for new jobs added to what has been a confusing series of up-and-down reports, with two strong months in February and March squeezed between weaker numbers in January and April. The gyrations are puzzling to analysts and investors, but the bottom line seems to be steady, if unspectacular, performance for American business.

April’s jobless rate dropped to 5.4%, its lowest level since February 1995 and down from 5.6% in March.

“We’re in decent shape,” said Robert Barr, deputy chief economist at the U.S. Chamber of Commerce. The economy is expanding fast enough to generate jobs for new workers without overheating and causing inflationary pressures, experts believe.

The Clinton administration quickly claimed credit for the low unemployment rate, saying that its policies are helping American workers.

“This is a very sound and strong economic picture,” said Laura D’Andrea Tyson, head of the president’s National Economic Council. “The economy is enjoying a solid, investment-led expansion that has brought the unemployment rate down and can keep it down.”

Treasury Secretary Robert E. Rubin discounted recent troubling signs about inflation in the form of higher gasoline and food prices and the steady rise in long-term interest rates this year.

“I think the most likely scenario is a continuation of . . . solid growth and low inflation,” he said.

While the White House focused on the jobless rate, Republicans emphasized the scant growth in new jobs. House Majority Leader Dick Armey (R-Texas) said the April report is “further evidence that our economy cries out for relief” from burdens imposed by government. He promised that Republicans will fight to bring working families “the relief they seek from historically high taxes and excessive government red tape.”

The tiny number of new jobs in April contrasted sharply with the March increase of 178,000 and a huge jump of 631,000 in February. Job creation is averaging about 221,000 a month, enough to absorb the modest growth in new workers each year.

Last month, the “spigot was turned off” for jobs, said Thomas Plewes, associate commissioner of labor statistics. “It may turn on again in May,” he said, noting that “millions of people make personal decisions about participating in the labor force.”

These individual choices--a matter of mood, perception and confidence--are more important than the hopes of politicians and the forecasts of economists. During April, the labor force--the total of those at work and those actively seeking a job--shrank by 294,000.

Friday’s unemployment report suggested that the economy is now growing far less robustly than it did during the first quarter of the year, when total output--the nation’s gross domestic product--grew by 2.8%.

Investors had become alarmed Thursday when the government announced the big expansion in the GDP. The news sent the Dow Jones industrial average plunging nearly 77 points because agitated investors are always wary of the threat of inflation from an overheated economy.

“The hysteria we had over the strong GDP report was completely misplaced,” Gordon Richards, chief economist for the National Assn. of Manufacturers, said Friday.

The market declined again Friday, but much more modestly, with the DJIA dipping 20.24 points to close at 5478.03. The Treasury’s 30-year bond closed at a yield of 7.11%, up from 7.05% on Thursday and the highest level in a year.

Investors inclined toward pessimism found one scrap of worrisome news: a 7-cent-an-hour increase in wages during April, compared with 2 cents a month before. However, for the year ending in April, the increase was just 3.1%, well within current inflationary expectations.

The first quarter was “clearly an exaggeration,” and the economy is returning to its long-term growth trend of 2%, Richards said.

Dean Baker of the Economic Policy Institute, a liberal think tank, also agreed that the GDP report gave an overly exuberant impression about what is happening to business.

“We have slow growth in employment and slow growth in the economy,” he said. “It is not going into a recession, but there clearly is no reason for concern about an inflationary boom.”

Even with Friday’s report of a drop in the unemployment rate, it remains in the same “narrow range [5.4% to 5.8%] where it has held since October 1994,” Commissioner of Labor Statistics Katherine G. Abraham told a hearing of Congress’ Joint Economic Committee.

Small gains in the service sector last month were accompanied by losses in construction and manufacturing, she noted.

Service jobs grew by 20,000 during the month, far below the gains of 125,000 monthly in the first quarter. Computer and data processing services continued their steady expansion, while other sectors such as amusements, recreation and help-wanted agencies, failed to match their past growth.

Construction employment, traditionally volatile, declined by 53,000 in April.

Overall, there was no change in private-sector jobs. The net growth of 2,000 for the overall economy came from expanded state and local government payrolls.

Manufacturing is having some problems, according to Friday’s jobs report. Employment declined by 17,000 in April and would have fallen even more except for auto workers who returned from a strike.

There were 126.1 million Americans working last month and 7.3 million unemployed.

* INVESTOR WORRIES: Long-term bond interest rates rise again; Dow loses 20. D1

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Mixed Signals for Workers

The U.S. unemployment rate fell in April to its lowest level in more than a year, but the overall labor market weakened as job creation came to a virtual halt, figures released Friday show. April’s 2,000-worker gain in payroll jobs was the poorest showing since January.

JOB LOSSES

53,000 in construction

17,000 in manufacturing

U.S. UNEMPLOYMENT

April ‘96: 5.4%

****

When New Jobs Rose, Fell

Monthly increase in payroll jobs, in thousands

JUNE 1995: Fed begins reducing interest rates

1996

JAN.: Cold weather hits much of nation

FEB.: Figures trigger 171-point Dow plunge

April ‘96: 2,000 new jobs

Sources: Times Washington Bureau, Associated Press, Labor Department