Unemployment Goal?

Pick a target: 4%, 5%--even 7%

After more than two years of recovery from the nation's worst postwar recession, lines at unemployment offices remain distressingly long, jobless youths cluster aimlessly on ghetto street corners, and politicians and economists continue to fret about the need to put more Americans to work. For Jimmy Carter, who campaigned on a platform dedicated to slashing unemployment, the persistently high rate of joblessness has become a critical challenge. Like his recent predecessors, Carter has yet to find the answer--if indeed one exists--for substantially reducing unemployment without setting off a new burst of devastating inflation.

Last week, after months of negotiations between the White House and liberal Congressmen, the President endorsed a compromise bill that would establish a national goal of cutting joblessness from its present 7% rate to 4% by 1983. Yet the bill, sponsored by Minnesota's Senator Hubert Humphrey and California Democratic Congressman Augustus Hawkins, requires no specific steps to attain the 4% goal.

Carter tepidly supported the original Humphrey-Hawkins bill during his campaign but later backed away from it as too inflationary. The bill then called for bringing unemployment down to 3% by 1981, and would have required the Government to use any means available--including job programs and tax and monetary levers--to meet that numerical goal.

The present version requires only that the President send to Congress short-and medium-term employment goals over the coming five years. In addition, the Federal Reserve Board would have to report on how monetary policy would fit into the jobs goal. The bill also calls for a strong commitment to "reasonable price stability," but sets no specific inflation targets.

Still, the declawed bill is backed by the congressional Black Caucus and myriad civil rights and women's organizations as well as Big Labor, all of which expect it to pass next year. For all its blandness, however, the measure is likely to run into stiff opposition from the increasingly powerful congressional business lobby. The U.S. Chamber of Commerce's chief economist, Jack Carlson, has already asserted that the 4% goal could not be reached without boosting inflation to an annual rate of 10% or more.

Does a 4% unemployment goal make sense? Though the economy has been generating new jobs at a fairly brisk clip--some 200,000 a month, bringing total employment to an alltime high--the jobless rate has been stuck at about 7% since April. The statistics say that today, 6.9 million Americans are looking for work, a number usually associated with deep recession rather than steady growth. But the scary overall figures mask conditions that are both better and worse than they seem. On the plus side, the unemployment rate for all whites is 6.1%. Among white adult males the rate is only 4.5%, and for women 6.8%. Where the picture is bleak is among blacks (13.9%) and teen-agers (17.3%); worst of all is joblessness among blacks under 20--37.9%.

To an important degree, the swollen jobless ranks reflect demographic changes that are rapidly scrambling all the old labor force equations. The children of the postwar baby boom are now flooding into the job market. Worst off in this group are the urban blacks and poor, who are hampered in getting work by discrimination, poor training and the flow of jobs from the cities to the suburbs and from the heavily populated North to the South and Southwest. At the same time, illegal aliens have been taking more and more low-wage work. Then there has been the rush of women into offices and factories. In the past two decades, the percentage of women working has climbed from 37% to 48%; they now make up 40% of the total labor force.

The impact of these changes on the unemployment figures is startling. Labor Department economists note that if the percentage of women in the work force was the same as it was in 1960, the national jobless rate today would be as low as 5%. If youth participation in the labor market was also rolled back to that year, the unemployment rate would be even lower--4% to 4.5%. A.F.L.-C.I.O. Chief Economist Rudy Oswald is quick to point out that 84% of women working last year were either single, widowed, divorced or married to men earning less than $15,000.

There is growing disagreement about whether 4% remains a valid full-employment goal. That mark dates back to the waning days of the "Eisenhower recession" in the early 1960s, when the Kennedy Administration set 4% as the lowest jobless rate that could be achieved without kicking off severe inflation. In fact, the last year that the U.S. had both 4% unemployment and relative price stability was in 1967. Today many economists believe the target must be raised. A number of liberals agree with George Perry of Washington's Brookings Institution that 5.5% to 6% is now the most realistic full-employment figure; he argues that the 4% goal is "deceptive" because it gives a distorted picture of the situation. On the conservative side, Herb Stein, chairman of President Nixon's Council of Economic Advisers, suggests adopting 7% as the full-employment rate. He raises the questionable hypothesis that the economy might not be able to absorb more job seekers without sending prices skyward.

While accepting the 4% goal, the Administration has decided not to mount any massive stimulus program to meet it. The economy has been expanding at a fairly brisk average rate of 5% to 6% over the past two years. But an even faster growth rate--some economists say as much as 7% over several years--is needed to get production back to normal and draw unemployment down. That, however, would risk a new outburst of inflation, a gamble the Administration is not prepared to take. So Carter has pursued a pinpoint approach to unemployment involving a $9.5 billion job program aimed at specific problem areas. The program, which encompasses nine different plans, including in-school vocational training for teen-agers as well as dam-and road-building projects of the old Civilian Conservation Corps variety, is expected to help 800,000 unemployed by next year. Yet even some liberals are wary about public service jobs. Arthur Okun of Brookings and a member of TIME's Board of Economists, would prefer to rely more heavily on the private sector by giving Government subsidies to firms that hire marginally skilled black teenagers. Says Okun: "It's a way we haven't traveled, and there's much to be done there."

Certainly some new and innovative policies are needed if high jobless rates are to be reduced. But progress is likely to be painfully gradual unless and until the policymakers manage to resolve what has become the industrial world's most intractable economic problem: how to strike an acceptable balance between employment and inflation.

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