The nation probably will continue to be plagued by unusually high levels of unemployment for the forseeable future, despite hopeful signs that the highest jobless rate in postwar history is declining.
The level of unemployment, which peaked at 10.8 percent last winter, is not projected to drop below 8 percent by election time next year and is expected to be hovering around 7 percent by 1990. This is far above the old "acceptable" unemployment rate of 4 percent of the labor force and the new targets of 5 or 6 percent, according to private and government economists. Although they insist low unemployment isn't a thing of the past, they don't see it in the near future, either.
"Five percent is a pretty long way off," said Roger Brinner, director of U.S. forecasting for Data Resources Inc., which predicted an 8.2 percent unemployment rate by the end of 1985 and about a 7 percent rate by 1990. Despite administration claims of a recovery, "In the eyes of the people who are out of work, we're still in recession," Brinner said.
The administration last month predicted unemployment rates as high as 8 percent through 1985, with the level dropping to 7.3 percent in 1986, 6.6 percent in 1987 and 5.9 percent by the end of 1988.
The continued high level of unemployment will largely be the result of structural changes that have occurred in the economy, such as the absorption of the Baby Boom teens and young adults, making the labor force grow faster than new jobs can be created. As the numbers in this age group decline, so should the rate of unemployment, economists said.
The whole issue of persistent unemployment is forcing economists and politicians to reconsider the public-policy boundaries of how low the unemployment level can go without incurring more inflation and how high a level the public will tolerate.
During the 1960s and early 1970s, policy makers generally considered an unemployment rate of between 3 1/2 and 4 percent as a full employment level. Attempts to reduce unemployment further through broad fiscal and monetary policy measures would only lead to inflation, they believed.
However, because of changes in the composition of the work force, increased foreign competition and battles to beat inflation, many economists have pushed up their targets for full employment to about 6 percent, a level that would not have been tolerated less than a decade ago.
"I don't expect unemployment to go below 6 percent or 7 percent in the forseeable future," said Jerry Jasinowski, chief economist for the National Association of Manufacturers. "For the next several years, we'll be at a higher level of unemployment than in the postwar period."
Attempts to keep unemployment at 4 percent may have contributed to recent inflation, said Robert Ortner, Commerce Department chief economist. He said the administration has no "magic number" for an acceptable rate of unemployment. "We'll just see how far we can go," he said.
The question that concerns economists and politicians is how much unemployment the public will tolerate. "I don't think the administration or the public should tolerate 8 percent" unemployment, although attempting to reduce the level of joblessness too quickly could fuel inflation, Ortner said. However, some economists said they are noticing a complacency among the public, a feeling that the public will remain hopeful so long as inflation keeps inching down.
"I think they'll be resigned to performance like this," Brinner said of the public. He predicted that President Reagan would not have the economy as a stumbling block if he chose to seek reelection, even with unemployment estimated at 8.4 percent by election time.
"People will probably tolerate it as long as there's progress in the numbers," said William R. Cline, a senior fellow at the Institute for International Economics.
The same demographic groups that suffered under current unemployment--minorities, teen-agers and workers in heavy industries such as autos and steel--will continue to be adversely affected the most by policies to keep down inflation.
Although unemployment will hover around 8 percent for the next several years, according to some economists' estimates, "Eight percent isn't a proper full-employment target," Cline said. "It will take years of recovery to bring unemployment down to a target level."
Such long-range projections are difficult to make and depend on what happens to the federal budget, monetary policy, energy prices, international stability, growth of the labor force and productivity. For example, Brinner said that continuing high interest rates caused the value of the dollar to increase by 23 percent between the fourth quarter of 1980 and the first quarter this year. If the dollar had held its value in mid-1980, by the first quarter of this year, unemployment might have been nearly one percentage point lower than it was, he said.
Other reasons for persistent high unemployment levels are the increase of women and teen-agers in the labor force, modest real growth of the economy, an overvalued exchange rate that could reduce export competitiveness and possible wage-demand pressures from the automobile, steel and other unionized industries, the economists said.
Already, despite heavy losses in employment, some unions representing manufacturing workers are demanding higher wages that could trigger an inflationary spiral that in turn could blunt the recovery that is intended to lead to more jobs, Ortner said.
In addition, more women and teen-agers are joining the labor force in numbers greater than the amount of jobs available, causing the unemployment rate to rise, Cline said.