Jobless Rate Rises to Highest Since 1994
The nation’s unemployment rate unexpectedly jumped to a nearly eight-year high of 6% last month, a sign that the full economic recovery may be longer in coming and slower to help the jobless than previously thought.
The April rate rose from March’s 5.7% pace as Americans flooded into the work force at a far faster pace than the economy created jobs, the Labor Department said Friday.
Better than half a million more people began looking for work last month, expanding the nation’s labor force to a record 142.6 million, according to department statistics. But U.S. employers created a mere 43,000 new jobs in April. And even that number was suspect as the government lowered earlier- reported job gains for February and March.
“The figures show the economy is still growing but only moderately,” said Lynn Reaser, chief economist of Banc of America Capital Management in St. Louis. “The pace of job formation remains very subdued.”
The 6% jobless rate was the highest since August 1994 and represented a substantial turnabout from the four-decade low of 3.9% that the country enjoyed just 18 months ago. Now, 8.6 million Americans are unemployed, about 3.1 million more than when the country hit the low in October 2000.
A substantial fraction of last month’s jump in joblessness was among women and whites, according to Labor Department statistics. The jobless rate for adult women rose 0.4 percentage point from March to 5.4%, while the rate for whites increased 0.3 percentage point to 5.3%. Most months, the two rates barely budge.
The jobless rates and increases for Latino and African American workers were substantially higher, although department officials said the numbers represent a smaller fraction of the overall work force and tend to vary widely. The Latino unemployment rate rose 0.6 percentage point to 7.9%. The African American rate increased 0.5 percentage point to 11.2%.
Despite the jobless rate jumps, analysts found some encouraging signs in the April statistics.
Manufacturing, which had been shedding more than 100,000 jobs a month from the start of the recession in March 2001 through January, lost only 19,000 last month. The temporary-help industry, which during the same period shed more than 600,000 jobs, or nearly 20% of its total, added 66,000 in April, its third straight month of job gains.
Analysts said the fact that so many people have begun looking for work, even if they have yet to find it, is a plus.
“It signals people who had given up and dropped out of the work force are back,” said William Cheney, chief economist with John Hancock Financial Services Inc. in Boston.
Stocks slumped and the dollar hit its lowest point since October against the euro as investors interpreted the new jobless numbers to mean a slower economic recovery and a weaker-than-expected rebound in corporate profit.
The Nasdaq composite index tumbled 31.79 points, or 1.9%, to 1,613.03. For the year, the tech-laden index is off 17%, reflecting continued trouble in the computer and telecommunications industries.
The Standard & Poor’s 500 skidded 11.13, or 1%, to 1,073.43, bringing its year-to-date loss to 6.5%. The Dow Jones industrial average fell 85.24, or 0.8%, to 10,006.63, down 0.2% from where it began the year.
The dollar, which steadily strengthened against other major currencies during the last seven years, skidded 1.6% against the euro Friday and 0.7% against the Japanese yen.
Decline of Dollar Raising Concerns
The dollar’s slippage in recent weeks has prompted concerns that international investors, who have relied on the dollar as a safe haven, may be having second thoughts amid continued tensions in the Middle East and signs of a weak recovery at home.
Although a slow decline in the dollar’s value would be a boon to U.S. manufacturers and therefore good for the American economy, most currency adjustments are abrupt and disruptive.
“People should be careful what they wish for in this area,” said Edwin M. Truman, a former senior Treasury and Federal Reserve official. “Once one of these things get going, they can be hard to stop.”
The new jobless report came only four days before the Fed’s policymaking Federal Open Market Committee meets Tuesday, and analysts said the committee was likely to reinforce its decision to leave interest rates at a 40-year low.
“This was not a jobs report that would panic any fence-siting member of the FOMC” into raising interest rates, said Joel L. Naroff, a Holland, Pa., economic consultant. “Indeed, it’s just another reason for the Fed to continue to wait and watch.”
That’s because the report showed a slowdown in wage growth that, though painful for American workers, reduces the already minimal danger of renewed inflation and therefore removes the need for the Fed to increase rates to protect against a new price spiral.
Earnings for Most Increase Slightly
According to the report, average hourly earnings for nonsupervisory workers, who account for about 80% of the U.S. labor force, increased 2 cents in April from March to a seasonally adjusted $14.69.
Labor Department officials described April’s job gain of 43,000 as “essentially flat” and said it marked the third straight month in which the country’s employment total remained basically unchanged. Officials revised their previous estimates that the economy created 58,000 new jobs in March and 66,000 in February. They now believe it lost 21,000 in March and 4,000 in February.
Besides the temporary-worker industry, others that added workers last month were restaurants and bars (31,000), transportation (18,000) and health care (15,000).
The biggest job loser was construction, a sector in which payrolls dropped by 79,000. But analysts discounted the significance of the loss, saying it was largely the product of heavier-than-usual hiring earlier in the year because of the unusually warm winter.
