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by KENNETH N. GILPIN
Sunday, Jul. 06, 2003 at 7:18 AM
In a bleak start to the Fourth of July holiday weekend, the government reported today that the nation's unemployment rate climbed to its highest level in more than nine years during June.
The Labor Department figures were almost uniformly bleak. Employers eliminated 30,000 jobs last month, a bit more than Wall Street economists had expected. Equally important, May's job losses, which had initially been reported at 17,000, were sharply revised, to 70,000.
The unemployment rate, which stood at 6.1 percent in May, jumped to 6.4 percent in June. The jobless rate has not been this high since April 1994. This was the biggest month-to-month increase in unemployment since immediately after the Sept. 11, 2001, terrorist attacks.
The report surprised and disappointed most analysts, who had expected that the unemployment rate would probably post a very modest increase, to 6.2 percent.
William Dudly, chief United States economist at Goldman Sachs & Company:
"About the best you can say is that the labor market is deteriorating at a slower pace," he said. "Still, the Federal Reserve has to be somewhat discouraged by this report."
Bond prices fell sharply after the employment report was released, and bond yields, which move in the opposite direction, climbed. This afternoon, the price of the Treasury's 10-year note was down nearly a point, pushing its yield up to 3.65 percent, from 3.53 percent late Wednesday.
Analysts consider the employment figures to be a lagging economic indicator. But there were elements in today's report that do not bode well for the summer quarter. And those who expected a post-war pickup in the economy are still waiting for it to happen.
The Bush administration, which is likely to coming under increasing political attack about its handling of the economy, reacted coolly to the unemployment figures. In a statement, the White House said the job figures were a "sign of a slow recovery from a short, shallow recession."
Specifically, analysts were troubled by the fact that those who were employed did not work longer hours last month; the hours worked figures were flat. If final demand in the economy were growing, hours worked would be rising.
Moreover, wages for those who were employed did not jump much; average hourly earnings rose just 0.2 percentage points. In conjunction with a rising unemployment rate, slower wage growth is not likely to bolster consumer confidence, analysts said.
Separately, the Labor Department said that initial unemployment claims, weekly figures that analysts consider a coincident indicator, rose to 430,000 last week, an increase of 21,000 from the previous week.
"Claims are not trending down; they continue to trend up," said Paul Kasriel, director of economic research at the Northern Trust Company in Chicago. "These are real people standing in real lines."
The monthly employment report continued to paint a very bleak picture in the manufacturing sector. Factory employment fell by 56,000 last month. It is the 36th month in a row that manufacturing employment has declined. Since July 2000, factories have laid off 2.6 million workers.
"The Fed said on June 25 that the labor market was stabilizing," said David Rosenberg, chief economist at Merrill Lynch & Company. "I think it is deteriorating."
David Resler, chief economist at Nomura Securities International, said that overall employment levels in manufacturing are now roughly equal to where they were in 1958, when the country's population was 100 million less than it is today.
There were few bright spots in the today's employment report.
Construction, which has been sustained by continued strength in the residential housing market, saw employment rise for a fourth straight month.
And there were gains in health care, leisure and hospitality and temporary employment services.
But those increases do not erase the fact that since March unemployment has increased by 913,000, or that in June 2 million people had been unemployed for 27 weeks or more. That is an increase of 410,000 since the start of the year.
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