The American economy, after a year and a half of halting growth, apparently began to decline in October, the government's latest data indicate.
The strongest evidence that the economy may have entered a recession last month came yesterday from the Labor Department, which said fewer Americans were on the job last month than in September, and the average employee worked half an hour less per week. The result very likely was that they produced less in the way of goods and services.
"If we are moving into a recession in any meaningful way, it has just begun," said one government economist. "It started in early October."
Earlier in the week, the Labor Department reported that the number of workers who have recently lost jobs and applied for unemployment benefits jumped to 454,000 one week late last month, up more than 50,000 from the level two weeks previously. Back in May, initial claims were running about 346,000 each week.
The large increase last month indicated that the economy's fragile growth had finally been undone by slumping consumer and business confidence, soaring oil prices and the contentious debate over federal tax increases. The numbers indicate that businesses are stepping up their layoffs in an effort to keep costs under control as their sales soften and they prepare for worse times ahead, analysts said.
One reason many economists have taken such a dim view of the recent economic data is that the prospects for a quick reversal seem remote. General Motors Corp. and Ford Motor Co., for example, announced they plan to idle more than 50,000 employees before Thanksgiving to bring production in line with the low level of new car and truck orders from their dealers. Those cutbacks alone all but guarantee that total output of the nation's factories will fall this month, as the Labor Department data on employees' hours worked suggests it also did in October.
Even with all the weakness in the labor market last month, the civilian unemployment rate remained at a seasonally adjusted 5.7 percent. The rate did not rise because the size of the labor force and the number of jobs, as shown by a survey of U.S. households, went down by just about the same amount. The survey showed that civilian employment was down by 187,000 from September.
Donald Straszheim, chief economist at Merrill Lynch & Co., told a Joint Economic Committee hearing yesterday that the latest jobs report reflected an accumulation of the weaknesses the economy has seen over the past several months.
"The economy is sinking and sinking fast. We're in a recession, the question is how deep and how long," Straszheim declared.
In another government report issued yesterday, the Commerce Department said its index of leading indicators, whose movements often foreshadow changes in the overall economy, fell 0.8 percent in September. That made the index's total decline 1.9 percent over the past three months, a path that has been consistent with significant economic weakness and often with recession.
Not only has the overall leading index dropped for three months in a row, but several of its components have been falling for some time. They include building permits, changes in unfilled orders on manufacturers' books and consumer expectations about future economic conditions. In August and September, contracts and orders for new plants and business equipment and stock market prices also dropped.
One private-sector report, the National Association of Purchasing Management's monthly survey of conditions in manufacturing, provided more bad news this week. Its overall index, which is based on separate reports on production, new orders, employment, speed of supplier deliveries and price changes, dipped to its lowest level in eight years. The latest figure, 43.4 percent, historically has been associated with a declining gross national product.
The new orders component is also at its lowest level since the end of the 1981-82 recession, another indication that manufacturing is likely to be depressed for some time to come.
Manufacturing employment fell by another 60,000 jobs last month, according to yesterday's Labor Department report. That brings the job loss to 175,000 in the past three months and 580,000 since a peak in factory employment in January 1989.
In addition, losses in manufacturing and construction were not offset by increases in the service sector, as has been the case in the recent past. Private service sector jobs increased by only 44,000 in October and government jobs rose by 30,000.
Janet L. Norwood, commissioner of labor statistics, told the Joint Economic Committee that construction employment dropped by 80,000 last month as "heavy layoffs hit the industry." Since June, 165,000 construction jobs have disappeared and the unemployment rate among industry workers reached 13.2 percent last month, she said.
Changes in the amount of money being spent on new construction, and the number of workers on the job, lag behind changes in new contracts being signed and starts of new housing units. With fewer and fewer contracts being signed for commercial office buildings and shopping centers and with housing starts down to recession levels, analysts said construction layoffs are likely to continue.
For instance, the Commerce Department said this week that construction spending fell 2.8 percent last month, the largest monthly decline since the last recession.