The nation's civilian unemployment rate unexpectedly fell last month to 7 percent, its lowest level in more than five years, the Labor Department reported yesterday.
President Reagan said the drop in the rate was "exciting news" and evidence that the economy was "packing new power." Prior to the August drop, the nation's unemployment rate had remained stuck at 7.3 percent for six consecutive months.
Beryl Sprinkel, chairman of the Council of Economic Advisers, told a White House news conference that increases in employment to record levels and other recent economic statistics indicate that the economy will grow at a 5 percent annual rate in the second half of this year, just as the administration predicted last month.
Many economic forecasters outside the Reagan administration yesterday were not so sure. Most forecasters are predicting a faster rise in the gross national product, adjusted for inflation, than the 2 percent rate of the second quarter, but very few are as optimistic as Sprinkel. More common forecasts call for an increase in real GNP at a 2 percent to 3 percent rate this quarter and at about a 4 percent rate in the final three months of 1985.
The unemployment rate fell as a result of a healthy 310,000 rise in the number of jobs and a small 15,000-person drop in the size of the civilian labor force, the Labor Department said. The number of persons unemployed dropped by 324,000 to 8,127,000 -- the smallest number without work since August 1981.
Despite the drop in the August unemployment rate, however, a survey of federal statistics and unemployment specialists yesterday showed that nearly two-thirds of the more than 8 million people unemployed in August received no unemployment benefits. The shrinking proportion of benefit recipients represents a dramatic change over the last decade. Details, Page A8.
Some analysts questioned whether the labor market situation had actually improved as much as the figures indicated, suggesting that seasonal adjustment factors may have distorted the data. Most of the decline in unemployment occurred among teen-agers, whose unemployment rate fell from 19.5 percent to 17.3 percent. Among black teen-agers it went from 41.3 percent to 34.4 percent.
Commissioner of Labor Statistics Janet L. Norwood cautioned that the numbers for teen-agers are "quite volatile . . . Additional data are needed to determine whether the August decline will be sustained."
Norwood also noted that the unemployment rate for adult men fell from 6.3 percent in July to 6 percent in August as their job total rose by 250,000. However, she added, "most of the employment increase occurred among men aged 25 and over, but most of the decline in joblessness occurred among males in the 20- to 24-year-old age group. Joblessness for those 25 and older -- both men and women -- changed very little from July to August." The rate for all adult women rose slightly from 6.6 percent to 6.7 percent.
Figures from a separate survey of business payrolls showed a 288,000-job increase, mostly in service-producing industries. Manufacturing employment rose by 37,000 in August, but there, too, Norwood said seasonal factors could have been at work. The bulk of the gain, about 25,000 jobs in the automobile industry, "may have been affected by the fact that fewer than usual shutdowns for retooling to produce new model cars occurred, thereby exaggerating the seasonally adjusted increase," she said.
"Overall," Norwood added, "manufacturing jobs are down 210,000 since the beginning of the year, with over 80 percent of the loss occurring in primary and fabricated metals, machinery and electrical equipment."
Most analysts had been expecting little or no change in the unemployment rate in August since there were few available signs that the pace of economic activity was speeding up. The July index of leading indicators, released at the end of August, rose but did so largely because of rapid growth of the money supply. Manufacturers' orders fell in July.
Nevertheless, CEA Chairman Sprinkel said there is "clear evidence" that growth will reach the predicted 5 percent rate in the current half year. In addition to the August employment figures, he cited strong auto production and sales, rising construction spending, and strong sales of existing homes, which could lead to a rise in starts of new housing units.
At the other extreme, a handful of economists believes that the nation will be moving into a recession before the year is out. Others, not that bearish, think growth will be so slow that unemployment will go up. Among the latter is Robert A. Gough, senior economist at Data Resources Inc., who foresees a slowly rising jobless rate through the first part of next year, with a 7.5 percent civilian level by November or December.
The unusually wide disagreement about the course of the economy over the next three or four months, much less the next year or two, was underscored by the results of a recent survey by Wharton Econometric Forecasting Associates. Wharton surveyed economists working for its clients and found that few "are predicting a recession in the next few years. This is not particularly comforting, however, since the group also expressed wide disagreement about exactly what the economy's performance will be."