The first batch of October economic statistics indicates that the summer's pause in the economic expansion is continuing, with little growth evident last month, according to analysts.
The Labor Department reported large gains in October employment -- 347,000 in its survey of households and 441,000 from actual payroll data -- but the total number of hours worked actually fell slightly. The report "suggests continuing weakness in the economy during October but no recession," said economist Allen Sinai of Shearson Lehman/American Express.
Another sign of continued weakness was the big jump in the number of initial claims for unemployment benefits filed in the week ended Oct. 20. Some 426,000 claims were filed, up from 392,000 the week before and up almost 50,000 from the level in the last week of September. The rising level of claims is a strong sign that the number of layoffs in rising, probably as production schedules are cut to bring output more in line with relatively weak sales.
The monthly survey of the National Association of Purchasing Management pointed in just that direction. The survey found that new orders for goods dropped in October for the second month in a row and that deliveries of goods speeded up. The faster delivery by sellers allowed purchasing managers to move to cut inventories and shorten ordering lead times. Only 7 percent of those surveyed reported slower deliveries of goods, the lowest level since February 1983, when the economic recovery was just getting under way.
Twenty percent of the purchasing managers also said their firms reduced their payrolls in October, while only 11 percent reported increases. The 11 percent figure is the lowest since January 1983.
At the same time, the general sense of a modest decline in economic activity was reflected in lower inflation. For the sixth consecutive month, the group reported fewer price increases than in the month before. In October, 15 percent reported higher prices, but almost as many, 13 percent, reported lower prices.
Looking at these and other recent statistics, economists Roger Brinner and Robert Gough of Data Resources Inc. reiterated their prediction that the gross national product, adjusted for inflation, will rise less this quarter than the 2.7 percent rate of increase in the third quarter. And they added, "If interest rates do not come down much over the next few months -- and there is a good chance of that -- we could be in for a quicker correction in the economy than most analysts anticipate, including ourselves."
The latest DRI forecast calls for a period of very slow economic growth during the middle of 1985 but no actual recession.
Sinai, extrapolating from the information in the Labor Department report on employment and hours worked, said that industrial production probably rose only 0.3 percent or 0.4 percent in October, not enough to regain the ground lost in September when it fell 0.6 percent.
With the total number of hours worked down slightly, any increase in wage income was largely limited to whatever gains occurred in hourly pay. With other forms of income still rising, however, Sinai said total personal income probably went up 0.4 percent or 0.5 percent, only about half as rapidly as in September and well below the pace of the first half of the year.
Overall, Sinai said, the October employment report, which showed the civilian unemployment rate unchanged at 7.4 percent, underscored how much better the service sector of the economy has done than has the goods-producing sector.
"Growth in the service side of the economy is continuing at a good pace but the goods-producing sectors have been weakening," he said. "Part of the pattern stems from the fading thrust of the fiscal stimulus that produced so much strong growth early in the expansion."