Saturday, September 6, 2003

Job number disappoints


U.S. payrolls down 93,000 people in August

By Leigh Strope
The Associated Press
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WASHINGTON - U.S. companies slashed payrolls for a seventh straight month in August, raising new worries that a weak jobs market could shackle the budding economic recovery despite a slight improvement in the overall unemployment rate.

Payrolls fell by 93,000 last month after a loss of 49,000 jobs in July, the Labor Department reported from its survey of U.S. businesses. Analysts had expected an improving economy to create 12,000 jobs.

"This suggests that we may be further than we thought from a truly sustainable economic recovery," said Bill Cheney, chief economist at John Hancock Financial Services Inc.

Based on a separate survey of households, the unemployment rate fell in August to 6.1 percent from 6.2 percent. Labor Department analysts said they think that the payroll statistics from the survey of businesses provides a more accurate picture of the economy because the survey figures were based on a larger sample.

Recent economic data had suggested that the economy was perking up: Many retailers reported robust August sales, construction spending was up, and manufacturers saw demand for their products sharply rise.

Improvements have failed to trickle down to the job market, however. Businesses remain extremely cautious about hiring and are holding down costs by doing more with fewer workers. That huge rise in productivity is to blame for some of the job losses.

Also worrisome is that layoffs occurred in a range of industries last month. Hiring was reported in health care and construction, but the gains were too small to offset losses in manufacturing, business services and government.

The longer companies put off hiring, the more the recovery is at risk, economists say. People worried about their jobs stop spending, and consumer spending has been the major driver of the economy.

"I don't think the recent revival in the economy is sustainable unless we see some job growth soon," said Mark Zandi, chief economist at Economy.com. "We need to see those jobs to help pick up the slack when the benefits of tax cuts and interest rates begin to fade early next year."

Many economists now think that the lack of new jobs means structural changes are occurring in the economy instead of cyclical ups and downs. The United States is losing market share to global competitors.

In short, a flood of jobs is going overseas and will not be replaced, said Sung Won Sohn, chief economist at Wells Fargo.

"We have simply seen the tip of the iceberg," Sohn said. "I think it will get worse, not better."

Some reports estimate 5 million jobs, many of them high-paying, will be lost to other countries by 2015.

Manufacturing has lost almost 16 percent of its work force, or 2.7 million jobs, in a record 37 straight months. Another 44,000 jobs were lost last month.

National Association of Manufacturers President Jerry Jasinowski called Friday's jobs report lousy, saying it should serve to spur policy-makers into action.

"The economic strength of our country is built upon our manufacturing base, and we are in danger of losing our best people and our productivity," he said. "We cannot maintain strong economic growth without a strong manufacturing base."



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