Long-term factors could pull US jobless rate below 7.4 percent

The US civilian unemployment rate remained stuck at 7.4 percent in October, leaving 8.4 million Americans looking for work. The jobless rate is showing little downward movement for several reasons, experts say, including a slowing of the economy, a pickup in the number of people looking for work, and an increase in the number of layoffs.

Many forecasters expect only minor improvements in the jobless rate in the near term, at least in part because the economy is cooling off.

But in the longer term, analysts say, there are demographic factors at work that could reverse the historic ratcheting up in unemployment rates.

With one exception, since World War II the lowest unemployment rate in the most recent recovery has always been higher than the lowest jobless rate in the previous recovery.

The unemployment figure, the last major economic indicator released before election day, ''has shown little movement since last May,'' Janet Norwood, commissioner of labor statistics, told the Joint Economic Committee Nov. 2.

In May, the unemployment rate stood at 7.5 percent and was 7.4 percent in September.

Given their timing, the figures were greeted in partisan fashion.

White House spokesman Larry Speakes said they showed ''more Americans are working than ever before and the promise of new jobs remains brighter than ever.''

Job creation picked up in October, and since the recession's trough, the number of jobs has risen by 6.5 million. By contrast, 10 million jobs were created during the Carter administration, according to the Bureau of Labor Statistics (BLS).

Sen. William Proxmire (D) of Wisconsin said the figures showed that there was ''a stall in the recovery,'' and that during the Reagan administration the nation suffered ''the highest level of unemployment this country has endured.''

Unemployment stood at 7.5 percent when Mr. Reagan took office and peaked at 10.7 percent in November and December of 1982. Last month there were 360,000 more unemployed individuals than when he took office. During President Carter's term, the total number of unemployed grew by 794,000, the BLS says.

The Full Employment Action Council, a group of labor, civil rights, and church leaders, charged Nov. 2 that the official unemployment rate severely understates the nation's unemployment problem because it omits those too discouraged to look for work or those who are involuntarily working part time.

There are various reasons why the jobless rate has not dropped significantly in recent months.

''We have seen more rapid labor-force growth in the past five or six months, and that is a dampening factor'' on further reductions in the unemployment rate, says Robert Wescott, senior economist at Wharton Econometric Forecasting Associates.

The government calculates that the unemployment rate by dividing the number of those looking for work by the total labor force, the sum of employed workers and job seekers.

New workers decided to look for jobs as they saw ''laid off people going back to work,'' notes Edward Friedman, senior economst at Chase Econometrics. In September the economy created 350,000 new jobs, one of two BLS unemployment surveys showed, but the labor force grew by 320,000, with the the gain concentrated among women. In addition to more job seekers, improvements in unemployment halted as ''the rate of job creation slowed in the May-to-September period as the economic expansion lost steam,'' Mr. Wescott noted.

The jobless rate is likely to show little or no improvement in the near term, economists say, if the recent slowdown in economic growth persists. Forecasters say the economy must grow at an annual inflation-adjusted rate of from 3 to 3.5 percent to absorb new workers and keep the jobless rate from rising. In the third quarter of this year the economy grew at a 2.7 percent rate, the government said last month.

The progress economists expect on unemployment depends on how pronounced they expect the economic slowdown to be.

Wharton predicts the economy will grow at a 3.6 percent rate in 1985 and thus sees unemployment averaging 6.9 percent next year.

Data Resources Inc., another major forecasting firm, sees the economy growing 2.5 percent next year and thus expects unemployment to go as high as 7.8 percent by year's end. September's jobless numbers are ''as good as you are going to do, '' says Robert Gough, DRI senior vice-president.

But in the longer run forces are at work that could allow some significant futher reduction in unemployment.

The number of young people entering the labor force has slowed, as has the rate of increase in the share of women working outside the home, Mrs. Norwood noted.

These factors and others ''might suggest it would be easier to reduce unemployment,'' in the future, she said.

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