Nation’s Jobless Plight Worsens
Jobs remained the dark side of the U.S. economy in July as American employers sliced payrolls by 44,000, marking the sixth straight month of losses, the Labor Department reported Friday.
The nation’s unemployment rate dropped two-tenths of a percentage point to 6.2%, but only because more than half a million people quit looking for work and dropped out of the labor force.
The economy has shed more than 1 million jobs since the recession ended in November 2001, making this the longest stretch of “jobless recovery” in half a century.
The latest employment numbers were particularly disappointing because they followed news Thursday that the economy had put on an unexpected burst of growth this spring, raising hopes that full-fledged prosperity is just around the corner.
Optimists sought to put the best face on the new jobs numbers, saying employment is a “lagging indicator” that improves only after an economic comeback is well underway.
They pointed to separate reports Friday that showed personal income and spending rose in June, and that manufacturing activity and consumer confidence edged up in July. They noted that the hiring of temporary workers -- often a harbinger of growth -- jumped by 42,000 last month.
But even the optimists acknowledged that the new numbers were worrisome.
“I certainly would have felt a lot better if we’d had a better employment report,” said Stuart Schweitzer, global markets strategist with J.P. Morgan Fleming Asset Management in New York. “If this is a recovery, it’s a job-loss recovery so far, and that’s troubling.”
Indeed, the economy’s ability to produce growth without jobs raises the specter that technology is allowing companies to meet demand for products and services without new hiring, and the country is becoming stuck in a kind of netherworld between recession and full recovery.
“Consumers can get by for a while on mortgage refinancing and tax cuts. But we need job growth to get a self-sustaining recovery,” said Merrill Lynch senior economist Gerald D. Cohen.
Like Thursday’s growth report, the latest employment statistics instantly were added to the presidential campaign stew.
President Bush said the nation is on the economic mend, in large measure because of a steady stream of tax cuts he championed.
“Our economy is growing and we’re confident that over time people can find jobs,” he told reporters after a Cabinet meeting.
Democratic presidential hopeful Sen. John Edwards of North Carolina asserted that this week’s bankruptcy filing of textile giant Pillowtex Corp. demonstrated the failure of administration policies.
“Can President Bush explain to the 5,000 Pillowtex workers who lost their jobs in North Carolina how his tax breaks for the wealthy are helping the economy?” Edwards asked.
Investors, rattled that surging interest rates and falling employment could derail recovery, pushed stock prices lower. The Dow Jones industrial average lost 79.83 points, or 0.86% of its value, to close at 9,153.97. The Standard & Poor’s 500 index fell 10.16 points, or about 1%, to close at 980.15.
There was almost nothing in the new employment report from which to draw encouragement. Besides July’s net loss of 44,000 jobs, the report revised the June figure to 72,000, more than double what the government initially estimated. Since the beginning of the year, U.S. employers have sliced payrolls by 486,000.
The nation’s manufacturing sector shed 71,000 positions in July and passed the dubious milestone of having lost jobs every month for three straight years. Since July 2000, U.S. manufacturing employment has fallen by 2.7 million.
High-tech hiring, which had shown tentative signs of rebounding, fell again. Professional and technical service employment dropped by 20,000, largely because of the loss of 12,000 computer-system design jobs.
Even the report’s one apparent bright spot -- the decline in the unemployment rate -- was tarnished by the fact that it was the product of fewer people looking for work, rather than more finding it.
The Labor Department stops counting people as unemployed once they stop looking for jobs. The result last month was a drop of 556,000 in the nation’s civilian labor force as well as a steep decline in the number of people considered unemployed.
The unemployment rates for African Americans and Latinos fell in July in tandem with the overall rate, but for the same reason -- fewer people looking for work and more dropping out of the labor force.
The African American rate fell to 11.1% from 11.8% in June. The rate for Latinos slipped to 8.2% from 8.4%.
Analysts cautioned that some of the trends in the July report -- including the sharp drop in the labor force -- may be the product of attempts to seasonally adjust the numbers to take into account traditional factory layoffs, and therefore may be overstated. But even with that caveat, there was little to be encouraged about.
One important signal of job market improvement -- a rise in the average weekly work hours of employees -- was nowhere to be found. To the contrary, work hours dropped last month to 33.6, the lowest since the government began keeping records in 1964.
Analysts said that what good economic news there was Friday came from other indicators.
The Institute for Supply Management’s index rose to 51.8 last month, finally crossing the crucial 50-point mark that signals an increase in manufacturing activity. The new-orders component of the index jumped to an even higher 56.6 from 52.2 in June.
“Of everything about the economy we saw this week, the ISM is probably the best indicator of where we are headed, and it shows a mild recovery,” said Mat Johnson, chief economist of Quantit Economic Group in San Francisco.
Meanwhile, Americans’ personal income grew 0.3% in June, according to the Commerce Department. Personal spending also rose 0.3%.
“Despite the unsteady employment situation, consumers have enjoyed relatively steady income growth and it has supported consistent spending,” said Wachovia Corp. economist Gina Martin.
Finally, one of the major consumer confidence measures was up slightly from June’s level. The University of Michigan Consumer Sentiment index rose to 90.9 in July from 89.7.
