Unemployment Hits 4.9%, Lowest Point in 23 Years

WASHINGTON — The nation’s unemployment rate plunged to 4.9% in April, the lowest level since 1973, as the booming economy generated new jobs at a rapid pace, the Labor Department reported Friday.

American corporations and consumers alike are enjoying the best of two worlds--expanding payrolls and negligible inflation--and the experts are hopeful that the good news will keep coming.

“This has been the best time I can remember,” said John Endean, vice president for policy at the American Business Conference, a group of 100 high-growth companies.

Despite virtually full employment in many sections of the country, the economy “will not run into the surge of inflation the Federal Reserve Board is worried about,” predicted Martin Regalia, chief economist at the U.S. Chamber of Commerce.

The unemployment rate, falling from 5.2% in March, hit its lowest point in more than 23 years. The last time unemployment was 4.9% of the work force was in December 1973, when Richard Nixon was president and the nation was emerging from the Vietnam War. Since then, the country has gone through another war, four business recessions and five new presidents.

A vibrant economy is creating enough jobs to accommodate a rapidly expanding army of workers: The proportion of the population at work is a record 63.8%.

The buoyant jobs report for April “is a great tribute to the American people and to the validity of the new economic policy we brought here in 1993,” said President Clinton.

Friday was a politically triumphant day for the president. He also reached an agreement with Republican congressional leaders on a plan to achieve a balanced federal budget by 2002. The robust economy that is expanding with millions of new jobs is expected to produce a flood of extra tax revenues for the federal government from businesses and individuals, making it easier to balance the budget.

The budget deal helped reassure the financial markets, always skittish about the threat of inflation. The Dow Jones industrial average bounced up 94.72 points to close at 7,071.20. The blue-chip index gained 332 points during the week.

April’s 4.9% jobless rate was particularly impressive because it came without any significant signs of inflation in the economy. Many economists have argued in recent years that there is a “natural rate of unemployment” of 6%, warning that a drop below that level would bring on labor shortages, rapidly rising wages and inflation.

Instead, inflationary pressures have been scant--the consumer price index has risen 3.3%, while average hourly earnings have climbed just a bit higher: 3.6% over the year. Average earnings actually dipped in April, down by a penny to $12.14 an hour.

The country is “well within that lucky range where workers are receiving well-deserved real wage increases but there are still no signs of inflationary pressures,” said Janet Yellen, head of the president’s Council of Economic Advisors.

Inflation is not a threat today because the economy is not overheating, said Regalia, who predicted a moderate slowdown during the second and third quarters, compared with the explosive growth of 5% in the nation’s output of goods and services during the first three months of the year.

The inflation numbers “look pretty good, so there is no need for the Fed to move strongly,” said Michael L. Penzer, vice president and senior economist at the Bank of America in San Francisco. He predicted that the Federal Reserve would increase interest rates by a moderate 0.25% percentage points after its policymaking meeting later this month. In March, the Fed boosted rates by 0.25% points as a preemptive strike against future inflation.

The level of unemployment had been moving in a narrow range, between 5.2% and 5.4% of the work force for much of the last year. The drop to 4.9% in April was a solid and statistically significant change, Katherine L. Abraham, commissioner of labor statistics, told a hearing of Congress’ Joint Economic Committee. “It is not a quirky number,” she said.

The most recent California jobless figures show a decline in the unemployment rate in the state from 6.6% in February to 6.5% in March. The state added 41,300 jobs in March, the state Employment Development Department reported. The jobless rate for Los Angeles County was 7.2% in March, down from 7.3%.

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Asign that the nation’s economy is growing moderately, rather than overheating, came from the index of leading indicators, which foreshadows future business activity. The forecasting tool, which uses such measures as factory orders and stock prices to predict business activity in the next six months to a year, rose just 0.1% in March, the Conference Board reported.

The jobs report showed service-sector employment advancing strongly in April, with employment rising by 93,000 jobs. There were increases of 46,000 jobs at eating and drinking places, 34,000 in health services and 32,000 at retail stores, the Labor Department said.

Manufacturing employment fell by 14,000 jobs, partly reflecting shutdowns in the automobile industry because of a strike. Factories are running at high levels: The work week rose to 42.2 hours, reaching the record set in January 1995. And factory overtime reached an average of five hours a week, the highest level since the government began keeping track of this number in 1956.

Construction jobs dropped by 44,000, largely because of unseasonably cold weather during the survey week.

There were 129.4 million Americans at work last month, and 6.7 million unemployed.

Among major demographic groups, the jobless rates in April: men, 4.2%, down from 4.4%; women, 4.4%, down from 4.7%; whites, 4.2%, down from 4.5%; blacks, 9.8%, down from 10.7%; and Latinos, 8.1%, down from 8.6%.

* ONE FOR THE BOOKS

Wall Street closed out one of its best weeks with a broad rally led by technology issues. D1

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Jobless Rate

For the first time in more than 23 years, the unemployment rate has fallen below 5%.

April 1997: 4.9%

Source: Department of Labor