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Falling jobless rate perks up employment forecasts for the US

By Ed TownsendSpecial to The Christian Science Monitor / February 9, 1984



The continuing decline in unemployment in the United States may reinforce President Reagan's chances for reelection in November. Further drops in the jobless level to a possible 7 percent by election day could weaken what organized labor expected to be its strongest issue in a campaign to elect Walter F. Mondale as president.

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After January's decline in the unemployment rate to 8 percent of the civilian labor force (7.9 percent if the armed services are counted), economic forecasters are reconsidering their predictions for 1984. Many look for continuing drops after an impressive new-year start.

Before unemployment began dropping five months ago, economists - including the Reagan administration's embattled economic adviser Martin S. Feldstein - talked about a ''stabilized jobless rate'' of around 10 pecent this year. Instead the rate has dropped from a postwar high of 10.7 percent in November 1982 to the lowest level since October 1981.

Janet Norwood, commissioner of the Labor Department's Bureau of Labor Statistics (BLS), told Congress last week that the 2.7 percent decline in just over a year was twice as fast as during the recovery that began in 1975.

At the same time, she reported that the job situation improved for almost all groups in the monthly survey, with significant gains for blacks.

A few days earlier, the BLS reported that new applications for unemployment benefits dropped in mid-January to the lowest level in 41/2 years. The bureau also noted that the total number of people receiving checks was more than 2.4 million below the total of a year ago. The 340,000 new claims were the lowest since 335,400 in the week ended June 2, 1979.

Civilian unemployment was 7.4 percent when Ronald Reagan was inaugurated three years ago. The administration now predicts a 7.7 percent unemployment by the end of the year. Labor Secretary Raymond Donovan looks for ''a continuing down trend in the number who are jobless.'' White House deputy press secretary Marlin Fitzwater notes that breaking ''the 8 percent barrier'' so early in the year ''puts us very close to our predicted unemployment rate for the end of the year.''

After Mr. Reagan took office, the unemployment rate rose sharply as job seekers born in the ''baby boom'' flooded into the labor market just as a slowdown in manufacturing, mining, trucking, and other industries began taking a heavy toll on jobs.

The declines in the jobless rate over the past five months were in part a reversal of that situation: Slower growth in the labor force came surprisingly at a time of economic recovery and widespread new hiring.

Economists find it hard to explain the slowdown in labor-force growth. Jerry Jasinowski, an economist with the National Association of Manufacturers (NAM), calls it a ''big mystery'' that has accounted for statistical improvements in the unemployment rate. He suggests that it ''simply may be that some workers are not yet convinced there is a job available for them.''

The AFL-CIO has also stressed this point in challenging BLS figures as too low; it has said for more than a year that ''discouraged workers,'' who numbering well over a million, should be counted in the compilation of unemployment figures.

Other economists are hedging on optimistic predictions of further drops in the unemployment rate because of uncertainties about how many will enter the labor force now that more jobs are opening up.

''I don't think we can continue to expect large drops in the unemployment rate, such as those we have seen over the past couple of months,'' says Nariman Behravesh of Wharton Econometrics. Still, most agree that with a reasonably strong economy, even a slight 0.1 percent a month settling of the rate could bring the jobless level into a low 7 percent range by November - about the level of joblessness as when Reagan took office.