The economy's mixed signals

ALMOST six months after the biggest stock-market fall in history, the United States economy is moving along in better shape than might have been expected last October. Although concern about a possible recession has not disappeared, it is focused more on next year than this. But the statistics present something of a mixed picture - a sort of partly sunny/partly cloudy forecast that is, alas, all too typical of spring.

The March unemployment rate, 5.6 percent, the lowest since May 1979, has people cheering. It represents another ratcheting down a tenth of a point from the February figure, with some 800,000 jobs created in the past two months.

This is an extraordinary achievement. But it disappears in the light of another set of statistics. The 800,000 jobs figure was derived from a Labor Department survey of employers indicating 260,000 jobs created last month. A Labor Department survey of households, however, indicated 300,000 fewer people working in March than February. The employers' survey is seen as more accurate, because it involves a larger sample. This is the second month now that the two surveys have contradicted each other; they should harmonize again eventually, but in which direction remains a question.

Inflation as measured by the consumer and producer price indexes appears under control, but again, the signals are mixed. Several other factors suggest that inflation could increase: low unemployment, which can be expected to generate upward pressure on wages; some commodity price rises; and the current high rate of factory utilization.

The Federal Reserve Board, under chairman Alan Greenspan, is doing basically the right thing, with some but not too much tightening of interest rates. We can expect a bit more activism in the next few months as the Fed prepares to operate in a more ``hands off'' mode - a less visibly political mode - during the height of the presidential campaign later on.

For many economists, the loose cannon on deck is the trade bill that will be taken up by a huge conference committee after Congress comes back from recess Monday. The financial markets will presumably overreact to whatever bill actually emerges, but the possibility of foreign investors pulling out of US markets, and foreign trade partners retaliating against what they see as American protectionism, is a cause for concern; such actions could spur a recession.

We wish, meanwhile, that the markets would drop membership in the ``stat of the month'' club. It's bad enough that financial markets seem to overreact to everything - sometimes perversely. But there's also a tendency for the financial community to glom onto one set of figures at a time as if those were the only statistics to consider. Nowadays labor figures are stealing attention from the monthly trade deficit statistics, which only yesterday, it seems, were what drove the Dow Jones into ecstasy or gloom.

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