The nation's economic output declined slightly during the first three months of the year, the government reported yesterday, but administration officials said the drop-off was insignificant and that the economy had already turned around.
The Commerce Department said the "real" gross national product, total economic output adjusted for inflation, fell at an annual rate of 0.6 percent in the January-March period, while inflation accelerated from 6.1 percent in the last three months of 1977 to 7 percent.
Secretary of Commerce Juanita M. Kreps blamed the 0.6 percent drop in real GNP on the coal strike and the cold weather that shut down factories and kept people away from their jobs in January and February.
But by March "vigorous growth" had resumed, she told reporters. White House press secretary Jody Powell said the administration anticipates "a strong recovery in the second quarter."
Economists say economic output must rise about 4 percent a year to generate enough new jobs to keep unemployment from rising. It takes more than 4 percent growth to reduce joblessness.
Curiously, although total production fell for the first time since the first three months in 1975, the number of Americans [WORD ILLEGIBLE] work during January, February and March rose markedly.
Although she discounted the significance of the first quarter decline in production, Kreps said it underscores the need to enact President Carter's proposed $25 billion tax cut by Oct. 1. She said that without the tax cut the economy could founder and fail to create jobs next year.
Many members of Congress and others have advocated reducing the size or delaying the effective date of the tax cut in order to help contain the budget deficit and inflation. While joblessness has been falling steadily since Carter took office in January 1977, inflation has been rekindled.
Both the House and Senate Budget committees and most members of the House Ways and Means Committee are in favor of reducing the impact of the president's tax cut proposal, and administration officals last week discussed a suggestion by Federal Reserve Board Chairman G. William Miller that the tax cut be delayed until Jan. 1 for anti-inflation reasons.
But Kreps argued yesterday that the tax cut could help contain price increases by reducing worker wage demands.
Carter has proposed a voluntary program of business and labor cooperation with the goernment in reducing wage and prices increases by one-half a percentage point this year.
Kreps said that the 0.6 percent decline in real gross national product - the broadest measure of economic activity that anlysts have - during the first quarter means that the economy will not grow quite as fast for the year as a whole as the 4.7 percent the administration forecast in January. She said it would grow about 4.5 percent, and certainly not less than 4 percent. It grew 4.9 percent last year and 6 percent in 1976.
That view was echoed by Council of Economic Advisers Chairman Charles L. Schultze in a speech at North Carolina State University in Raleigh, but presidential spokesman Powell said the White House has not altered its growth projections.
Kreps said, "We are proceeding in the right direction at the right speed, but because of an unavoidable delay we are a little behind schedule."
Although GNP fell 0.6 percent after adjustment for inflation, it rose $31.1 billion, or 6.5 percent, to a seasonally asjusted $1.992.9 billion in current, inflated dollars.
Real GNP is measured in constant 1972 dollars; it declined from $1,360.2 billion to $1,358.3 billion.
All of the decline took place in final sales to businesses and consumers. After rising 6.1 percent in the fourth quarter of 1977, sales to final users - either businesses or consumers - dropped 1.3 percent in the first three months of the year. But a first-of-the-year decline in automobile sales has turned around and in recent weeks some Detroit assembly plants have been working overtime. Construction of homes and factories, hit hard by the weather, has also picked up steam recently.
Businesses accumulated more inventories in the first quarter than they did during the final months of 1977. Government purchases of goods and services also declined, and a record trade deficit in February had a negative effect on gross national product.