The nation's unemployment rate unexpectedly fell to 8.5 percent last month from 8.8 percent in December, the Labor Department reported yesterday, but economists cautioned that it did not signal an end to the recession.
Overall employment in January fell for the fifth time in the last six months, and the length of the average work week tumbled by a record eight-tenths of an hour. The declines probably indicate a further sharp drop in last month's industrial production.
Unemployment in the Washington area was 5.2 percent, the highest level since World War II. Government employment officials estimate 85,000 people are out of work in the metropolitan area.
Janet Norwood, commissioner of the Bureau of Labor Statistics, told Congress yesterday that because of the severe winter weather "January data are more difficult than usual to interpret," but she concluded, "The widespread nature of the nonfarm employment declines suggests that no real improvement in the labor market situation occurred in January."
White House spokesman Pete Roussel said "We're viewing the figures today with caution."
Private economists could find little to cheer about in the figures either. "I see the latest data as a very weak series of numbers and expect unemployment to shoot up past 9 percent in February," said Donald Ratajczak, a highly regarded forecaster at Georgia State University.
Most forecasts, including one released yesterday by the Congressional Budget Office, call for unemployment to exceed 9 percent soon and for the recession, which began in July, to hit bottom this spring.
George Perry of the Brookings Institution said the numbers reinforce his view that the recession will be "deeper and longer" than the administration or most private forecasters have been saying.
Perry said the decline in GNP, adjusted for inflation, this quarter probably will be as large as the 5.2 percent drop last quarter. He said he still expects a recovery to begin in the second half of this year, but warned, "Depending on how bad things get now, it could overwhelm the potential pluses later this year."
Meanwhile, the Federal Reserve Board reported that the money supply fell by $1.4 billion in the week ended Jan. 27 to a level of $447.6 billion. The central bank has been pushing up short-term interest rates recently in order to reverse a surge in growth of M1, a measurement that includes currency in circulation and checking deposits at financial institutions.
The rise in interest rates over the last three months is one factor making economists such as Perry unsure about the strength of the economy later this year. The latest decline in the money supply was just about what financial analysts had expected.
In the unemployment report, the Labor Department said the rate for adult men fell from 7.9 percent to 7.5 percent last month. The rate for adult women went down more modestly, from 7.4 percent to 7.2 percent. For teen-agers, however, the jobless rate climbed from 21.5 percent to 21.7 percent.
Unemployment among blacks dropped from 17.3 percent in December to 16.8 percent last month. The rate for whites fell from 7.7 percent to 7.5 percent.
Nonfarm payroll employment fell by 237,000, as the number of jobs in goods-producing industries went down 356,000. An increase of 119,000 jobs occurred in service-producing industries.
The unemployment rate for December, originally reported as 8.9 percent, was revised downward to 8.8 percent. The change was the result of the annual revision of monthly figures for the preceding year based on new seasonal adjustment factors, and the use for the first time of population data from the 1980 census.
As usual, the revisions smooth the changes in the unemployment rate from month to month. Among the changes was an increase in the 7 percent rate originally reported for July to 7.2 percent. That month is still the low point for the rate between the 1980 recession and the current one.