One of the last critical economic statistics that could be exploited by either political party before Nov. 6 was released last week. Unemployment declined slightly, from 7.5 to 7.4 percent of the civilian labor force. Some 270 ,000 new jobs were added during September. A companion count showed that business payrolls grew by 139,000 during the month.
Had there been a major negative change in the job picture, there might have been an attempt to paint a picture of an economy beginning to sink under the weight of record budget deficits and high interest rates. Instead, the outlook remains what it has been for several months - an aging economic cycle obviously burdened by high interest rates, but one in which business caution has not allowed excesses to develop and which could continue indefinitely. (October unemployment will be released Nov. 2, but little time will remain before election day.)
More than 6 million new jobs have been added since the end of the last recession. Major job creation has definitely slowed, but it has not ended. Construction spending has slowed; it showed a gain of only 0.2 percent in August. That gain, however, was because of strength in commercial and industrial building. Single-family homes, whose construction and sales react most swiftly to changes in interest rates, were off 3.2 percent. Home sales were off 8.1 percent in August, and the July figure, at first unchanged from June, was revised to a negative 2.2 percent.
To put it in perspective, construction spending in the United States accounts for slightly less than 10 percent of the GNP. That doesn't sound like much, compared with larger components of the GNP. But construction spending, inventories, and consumer durables are the dynamic parts of the GNP; their swings account for most of the change in an economic cycle. So the direction they are taking has a significance beyond their raw weight in the statistics.
Two other recent signs of slowing have also appeared: Purchasing agents reported the first drop in new orders (for September) since December of 1982, and factory orders were off 0.7 percent during August. Again, one-month movements alone are not too significant. But taken with other reports, the economy at least is pausing for a second breath.
Other news that can't be ignored is in the banking industry. Security Pacific , the nation's ninth-largest bank holding company, added $150 million to its loan-loss reserve. Fortunately, it coincided with a quarter in which it had a major profit from the sale of its headquarters building. Security's decision was tied to concern over foreign loans, which, at more than $5 billion, are about one-fifth its loan portfolio.
Later in the week, the First National Bank of Chicago, the 10th-largest US bank, wrote off $279 million in questionable loans during the third quarter and took an actual loss of $74 million for the quarter. Coming in a city that just saw the Continental rescue by the US government and in a state whose anachronistic banking laws still prevent banks from having as broad a consumer deposit base as they enjoy in almost every other state, one must hope that First National's explanation for its loss will be the end of the matter. The bank's spokesmen said this was a one-time affair that cleaned up its problem loan area.
The bank problems raise this question: Is all the adjustment from the overexuberance of the late '70s behind us, or are more effects waiting to be felt? The answer is still to be written. The speed of worldwide recovery and the demand for energy will affect the ability of third-world nations to service their debt and of energy projects conceived in other times to pay off.