MAY's unemployment rate, announced last Friday, of 7.3 percent of the labor force confirmed the picture of an economy growing just fast enough to stay above the recession line on the charts. It was the fourth month in which the unemployment rate did not change. While this, in one sense, represents no progress, that isn't entirely true. The labor force grows each month, so a stationary jobless rate does indicate the economy is able to create new jobs. In fact, during the month of May some 345,000 new jobs were created; without them, unemployment would have risen.
The nature of the new jobs is of some concern, however. Almost all of them were in the services sector. This includes everything from people dishing out hamburgers at fast-food chains to those who are learning new tasks sitting behind a computer console. During the past five months, however, 163,000 jobs have been lost in the manufacturing sector; some 28,000 of those were lost during the month of May.
Testifying before Congress, Janet L. Norwood, the commissioner of labor statistics, said that since the 1981-82 recession, only 60 percent of the jobs lost in manufacturing have been recovered.
Now, a change in the nature of the labor force isn't a bad thing. One factor that foreigners like about the US economy is its demonstrated resilience. The dynamics of capitalism apply not only to corporations making money, but to the nature of work, the kind of work that is produced, and the need for workers to do specific tasks. Nations that overprotect their industries or their work forces from change suffer economically.
What concerns many analysts about the American job scene today isn't this freedom of the work force to adjust, but the fact that the US economy is perhaps not adjusting vis-`a-vis the world economy in a way that's healthy for us in the long run.
The nature of a mature economy probably is to continue going from a goods-producing to a service orientation. But the shift going on in the United States is in large measure due to the overvalued US dollar, which is causing both bloated imports and a transfer of some US manufacturing overseas.
Whether all the jobs lost in manufacturing since 1981 should have been recovered is not easy to say, but one reason they have not been is this trade imbalance. Today one out of 8 males in the 20- to 24-year age bracket is unemployed, and the number rose last month. It is likely that in a more balanced trade situation, there would have been more manufacturing jobs and less unemployment in this young adult male population.
Retail sales for major department stores during May were also reported last week. They showed both gains and losses, but the overall picture was of a cautious consumer. This is in line with a reported decline in consumer confidence during May.
The economy is entering the summer months with something of a lull. If interest rates continue to fall, this will aid certain sectors of activity. Rates have been tumbling for weeks, however, and these phenomena don't usually proceed without a pause.
The tax-reform hearings, which will apparently be going on all summer in the House Ways and Means Committee, should be watched closely for their effect on overall confidence. Without knowing just which tax-law changes will emerge in a final bill -- if indeed both houses of Congress can actually agree on a final bill -- many business leaders are bound to postpone business decisions.