|
Jobless rate nine year high Original Source Link: (May no longer be active)
http://biz.yahoo.com/rb/030703/economy_10.htmlhttp://biz.yahoo.com/rb/030703/economy_10.html
Reuters
Jobless Rate Surges to Nine-Year High
Thursday July 3, 10:21 pm ET
By Caren Bohan
WASHINGTON (Reuters) - The U.S. jobless rate surged to a nine-year high in June as employers cut 30,000 workers from their payrolls, the government said Thursday in an unexpectedly gloomy report on the economy.
But a separate measure of the vast services sector showed it grew much more quickly than expected last month, revving up to its fastest pace since September 2000 and offering hope to some that businesses would soon start hiring.
The jobless rate hit 6.4 percent -- a much worse reading than the 6.2 percent projected by private economists. It was up three-tenths of a percentage point from May's 6.1 percent, to a level not reached since April 1994, the Labor Department said.
The employment report is "ugly on the surface and uglier when you look inside," said economist Stuart Hoffman of PNC Financial Services Group.
In the past five months, payrolls have tumbled by 400,000.
Some economists saw a mild positive in the rise in the labor force, saying increasing job seekers may presage a renewal of optimism in the economy.
In a report that offered a glimmer of hope, the Institute for Supply Management said its index of non-manufacturing activity surged to 60.6 in June from 54.5 in May. A reading above 50 signals growth in the service sector.
Stock prices fell, cushioned slightly by the service-sector report. The Dow Jones industrial average ended a shortened pre-holiday session down 0.79 percent at 9,070. Bond prices rose on the jobs data but slid later, with the benchmark 10-year note finishing off nearly a point.
"The services sector may begin to generate some jobs in the second half of the year. I think we could be seeing better employment numbers down the road," said Gary Thayer, chief economist at AG Edwards & Sons in St. Louis.
Drew Matus, U.S. financial markets economist at Lehman Brothers in New York, was less optimistic.
"Non-manufacturing ISM shows strength, but is this enough to spark a recovery? Probably not," he said. "We are a lot more concerned about the weakness in the employment report than we are heartened by the strength in this report."
Economists had expected payrolls to hold steady in June, rather than fall. The government revised May's payrolls to show a 70,000 drop instead of the earlier reported 17,000 decrease.
Emphasizing the weakness of the job market, the Labor Department said new claims for unemployment benefits rose last week to 430,000 from 409,000 in the prior week. Claims had been expected to rise to only 410,000.
DEBATE OVER THE MEDICINE
President Bush, gearing up for the 2004 presidential campaign, came in for some criticism from rivals on the news. Democrats have censured his economic stewardship and say his $350 billion tax cut, signed last month, is skewed to the rich and will do little to help growth.
"When President Bush came to office he claimed that tax cuts were an economic cure-all," House of Representatives Democratic Whip Steny Hoyer said in a statement. "Now we see that the medicine he prescribed has led to an increase in unemployment, a stagnant economy and debilitating budget deficits."
Bush's chief economic adviser, Gregory Mankiw, said the president stimulus package was a big step toward reigniting the economy.
"The jobs and growth package that was signed just a little more than a month ago is going to have a big impact on the economy in the second half of the year," Mankiw said on CNBC.
"A lot of workers have already seen their withholding go down and their paychecks go up and more workers will be seeing that happening the next few weeks," said Mankiw, chairman of the White House Council of Economic Advisers.
More than 2.5 million jobs have vanished since the economy slid into recession in March 2001. The manufacturing sector, where many of the cuts have occurred, now has the leanest payrolls since 1958. The economy has been growing since early 2002 but very slowly.
Worried about the lackluster recovery, the Federal Reserve last week cut short-term interest rates to 1 percent, the lowest since 1958.
Atlanta Fed Research Director Robert Eisenbeis said the poor job market reflected efforts by businesses to control costs and firm up profits.
"If people aren't investing, if they are being a lot more cautious, if they're still trying to improve profitability through productivity increases -- really managing their labor force -- they are going to be very conservative in terms of adding new jobs," he told Reuters.
Among the sectors that contributed to the June jobs decline were manufacturing, which lost 56,000 jobs, and information industries, which shed 10,000.
The unemployment rate is based on a survey of households that is separate from the poll of employers used to calculate the payrolls data. An influx of 611,000 people into the labor force helped push up the unemployment rate.
"The expansion of the labor market is one sign that people are a little more confident about jobs being there for the taking. A thin reed on which to rest a great deal of hope, but it is there," said David Resler, chief economist at Nomura Securities in New York.
Some signs in the payrolls report were less than encouraging. The length of the average workweek was unchanged at 33.7 hours in June. Factory hours were also steady at 40.2 hours, while overtime remained at 4 hours. Reticence to increase worker hours can indicate that companies are not ready to fattening payrolls any time soon.
|
|
