Initial claims for unemployment benefits totaled 606,000 in the week ended March 27, down from 623,000 the week before but still the third highest figure since the recession began last July, the Labor Department reported yesterday.
Economist Otto Eckstein of Data Resources Inc. said the high figures indicate that "the rate of decline of the economy was pretty steep at the end of March. The recession clearly is not over despite what some people in the administration are saying."
Eckstein called the seasonally adjusted initial claims figures for regular state benefits "the single most reliable indicator of the economy's performance in the short-run. They don't give false signals."
Administration economists have been warning that the unemployment rate could move higher than the 9 percent level in March, which tied the post-war record, and that the economy will turn around this quarter. "These claims numbers are consistent with that estimate" of a rise in unemployment, one administration official said. He also maintained that the prediction by Council of Economic Advisers Chairman Murray L. Weidenbaum that the gross national product will increase this quarter, after adjustment for inflation, is still accurate.
However, on the basis of the claims figures for recent weeks, as well as estimates of other March statistics, such as retail sales, Eckstein said he expects more of a decline in the second quarter of the year than the drop at a 1.2 percent annual rate that he had forecast. "It will be a larger minus than that," he said.
Alan Greenspan, the former CEA chairman who heads Townsend-Greenspan & Co., said that because of a large number of workers who have been recalled from temporary layoffs, it is not certain that initial claims figures of about 600,000 mean that payroll employment is falling.
"There is a lot of churning going on out there," Greenspan said. "You can't read it as clear evidence of a secondary downturn. But it does clearly confirm the recovery is not yet in sight."
And Greenspan added, "As the numbers now stand, the unemployment rate in April will be higher than in March. In other words, we will set a new post-war record."
Even if total employment is not declining, it certainly is not rising. That means that, all other things being equal, the normal steady growth of the population and the labor force will be translated into higher unemployment rates.
But whatever the current state of the economy, virtually all forecasters still expect some sort of recovery in the second half of the year. George Perry of the Brookings Institution said that the mid-year tax cut and the recent declines in oil prices will be "throwing $50 billion into consumers' pockets."
"The odds are that the recession is going to end," Perry said. "Monetary policy is tight, but it is not tight enough to keep this thing from getting going." On the other hand, he does not expect a recovery as strong as the one the administration foresees, with real growth running at close to a 5 percent annual rate in the final two quarters of the year. Perry is looking for more modest growth, averaging between 3 percent and 4 percent.
Perry and most other economists expect the recession to end whenever business stops liquidating inventories. Once the stocks on retailers' shelves are brought back in line with the current lower level of sales, and those of manufacturers lowered to the level needed to keep production lines moving at today's much reduced rates, the pace of new orders for goods will pick up even if sales to consumers do not. This increase in orders will occur because production has been cut well below the level of sales in order to reduce inventories.