THE RAPID rise in the unemployment rate is an unambiguous warning that public policy now has to move, and forcefully, to push the economy toward growth. Relying on the possibility that a recovery will automatically arrive in due course next summer or fall, or sometime, is perilously inadequate. The recession -- if that is still the word for it -- is deepening throughout the world.
The unemployment rate in this country last month was 10.8 percent. In Europe, the Common Market governments have been meeting gloomily in Copenhagen to take stock of their own deteriorating situation. Unemployment rates in Western Europe range as high as 12.8 percent in Britain and 14.8 percent in Belgium. In the past, expanding economies abroad have sometimes pulled the United States out of trouble. It won't happen this time. Only the United States has the strength to change the course on which events are moving.
The key to recovery is lower interest rates. The Federal Reserve Board has been nudging the rates down, but it is severely constrained by widespread fears in the financial markets of more inflation ahead. Those fears are fed by the size, and the growth, of the federal budget deficit.
The Federal Reserve's only instrument to lower interest is to supply more money to the banking system. If the Fed goes too fast, in a time of rising deficits, lenders will conclude that higher inflation is a certainty, and the interest rates -- contrary to textbook theory and contrary to the Fed's purpose -- will rise instead of fall. It's happened a couple of times in the past two years and, in the present circumstances, it could very easily happen again.
To change those circumstances will require vigorous action by President Reagan and Congress. The president's original program having collapsed, he is now talking as though he were losing interest in the whole unpleasant subject and saw nothing to be done about it. On the contrary, there are four things that need to be done promptly:
One: Mr. Reagan and Congress need to proceed with another tax increase. Last summer's tax bill made possible the substantial decline in interest rates over the past months, but they won't go much lower without another one.
Two: The Social Security system needs to be restored to solvency without a long corrosive quarrel. Ideally, the financial burden would be divided between people still working and those who have retired -- that is, between higher payroll taxes and limits on future increases in benefits.
Three: The present targets for defense spending are too high and, as Wall Street's analysts are well aware, the Pentagon is now contracting for weapons that will push actual spending, in the years ahead, far beyond even those high targets. The administration needs to get a grip on its defense program.
Four: Labor costs -- meaning everybody's pay -- are still rising too fast and, although he hates the idea, Mr. Reagan needs to use his pulpit to try to slow it down. Mandatory controls are impossible. But guidelining and jawboning and finger-pointing can be very useful. Employees' compensation, including fringe benefits, rose more than 7 percent in the year through September. That number implies an inflation rate higher than the present one. Either wage inflation comes down or interest rates will go up again, taking unemployment even higher. An active president can exert an important moral force by drawing attention to the big increases and their consequences for the country.
None of these four steps will be easy. None is very inviting. But it's not a bad time of year for people in high places to give careful thought to their choices. There's still time for Mr. Reagan to make changes in the budget, and in the State of the Union message that he will use next month to set his administration's direction for the coming year. The congresional leaders are already looking beyond this session to the next one.
Those unemployment numbers are a dry statistical representation of a great burden of distress and fear. It won't dissolve itself automatically. Much can be done about it, but only with the courage, in the White House and Congress, to correct past mistakes.