The nation's unemployment rate dropped sharply last month, to 7.3 per cent from 7.8 per cent, an indication that the economy was strengthening in December and early January.
But the government conducted its unemployment survey before sizable layoffs in the lat half of January caused by the shortage of natural gas. Even so, some of the effects of the cold weather showed up in yesterday's jobless report as construction industry hours fell sharply and the number of persons who stayed away from work because of the weather rose by a million, an increase twice as big as in any January in the last five years.
Presidential press secretary Jody Powell said that while President Carter was pleased at the dip in the unemployment rate, his advisers told him that "the economy is not improving anywhere near as fast" as the 0.5 percentage point decline suggests.
Powell also said the administration expects a February increase in the unemployment rate because of the gas shortage and other weather-related problems.
Nancy Teeters, chief economist for the House Budge Committee, told the committee Thursday that some economic forecasters predict an unemployment rate of 9.2 per cent for February, although her staff expects it to be slightly above 8 per cent.
The rate should fall as fast as it rises when natural gas supplies become more plentiful, although federal officials say that industries will face tight gas supplies until April and perhaps beyond.
Part of the decrease in the unemployment rate might have been weather-related in January as people found it too cold to look for jobs and dropped out of the labor force.
The number of unemployed Americans declined last month by 560,000, from 7.52 million to 6.96 million. But only 120,000 persons found new jobs. The remainder of the drop in unemployment occurred because 440,000 people left the labor force.
Julius Shiskin, commissioner of labor statistics, told the congressional Joint Economic Committee that while the agency does not keep tabs on why persons drop out of the work force, it is reasonable to think that the weather had something to do with it.
The unemployment rate, based on a survey of 47,000 households, is the percentage of the labor force that is actively seeking employment. The labor force is the sum of those who are employed and those who are not but are actively seeking work. The unemployment rate can fall either because people find jobs or because they stop looking for them.
Even though the January unemployment figures do not reflect the late January weather-related layoffs, "the figures may be helpful in gauging the underlying trend in the economy through the first half of January," Shiskin said. He noted that non-farm employment rose and non-farm unemployment fell, and the economy grew in December and early January.
Treasury Secretary W. Michael Blumenthal testified before the Senate Budget Committee yesterday that the economy may be improving more rapidly than the administration first thought, but not so fast that the [WORD ILLEGIBLE] is not needed.
There is substantial opposition in Congress to a key part of the package, the $50 tax rebate, and a desire instead to boost job creation programs. Carter economic advisers, including Blumenthal and Charles L. Schultze, said that the rebate is necessary to boost the economy until job programs can be put into effect.
While the unemployment rate fell sharply in January, so did the length of the workweek, particularly in outdoor industries such as construction, a reflection of frigid temperatures east of the Rocky Mountains.
The average weekly earnings of production workers also fell - from $182.73 in December to $179.12 - because of fewer hours worked. Average hourly earnings rose from $5.02 to $5.06.
The unemployment rate for nearly all major groups fell.Unemployment in construction rose from 14.1 per cent to 14.9 per cent.