THAT DROP in last month's unemployment rate is welcome, but it's also a warning. Just about everybody -- the Carter administration and its critics alike -- expected the rate to keep rising through the end of the year and into 1981. That may yet happen. The dip in August may prove only temporary. But there is a certain pattern here. For some years Americans have consistently overestimated the danger of unemployment and underestimated the strength of inflation.
By early summer, it seemed pretty clear that the recession would be relatively short -- meaning that it would hit bottom in the fall. Since unemployment typically lags behind the economic cycle, it was logical to assume that the rate might rise from July's 7.8 percent to something well over 8 percent early next year. Instead, while all of this careful calculation was going on, it now turns out that the rate was falling in August to 7.6 percent.
When everyone is surprised by a number, including some very acute and experienced students of the subject, that's a signal to begin looking around for other surprises. For a long time it had seemed that wages were becoming increasingly rigid in the American economy. Even adjusted for inflation, they hardly ever moved any way but up. Declines were rare and brief. But since the beginning of 1978, average real hourly earnings in this country have been -- surprisingly -- falling consistently. That average is now 8 percent below the peak a year and a half ago.
One way to explain it is to point to the large numbers of young people pouring into the labor force, most of them into beginners' jobs at low pay. That's a normal and desirable process. But it is indisputable that wages are a little lower than the forecasts expected, and employment a little higher. There may well be a relationship between those two surprises.
Meanwhile, unfortunately, inflation goes roaring along. The calculations that predicted rising employment also showed inflation falling below a rate of 10 percent a year by Christmas. The producers' price statistics for August now make that prospect a shade less likely. Prices of raw agricultural products, at the beginning of their journey to your dinner table, have risen 19 percent in the last two months.The price index for all finished goods, as the left the producers' plants, has been rising as fast this summer as it did last winter. This time, most of the trouble is, notoriously, in food prices. But the long and damaging droughts this summer make it less plausible that food prices will return soon to stability.
It's always perilous to draw large conclusions on the basis of one month's data. But it's necessary at least to consider the possibility that this recession is making less differences, to either employment or inflation, than anyone had supposed possible.