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by Cognitive Dissonance
Friday, Oct. 31, 2003 at 12:05 PM
Catch this: Payrolls plunge 93,000, but unemployment rate edges down. Hellloooooo! The number of people receiving a paycheck goes down but unemployment is down? I don't think so. The two are mutually contradictory.
Posted 9/5/2003 8:37 AM Updated 9/5/2003 12:36 Payrolls plunge 93,000, but unemployment rate edges down
WASHINGTON — Employers cut jobs in August at the fastest pace since March, the government said in an unexpectedly downbeat report Friday showing that businesses are continuing to cut jobs even as some areas of the economy are recovering.
The number of workers on U.S. payrolls outside the farm sector slid 93,000 in August after dropping 49,000 in July. Economists had expected a modest increase.
Even as the jobless rate edges lower, companies are slashing jobs.
August was the seventh consecutive month of cuts in payrolls, a survey of businesses showed, indicating continuing weakness in the job market.
But according to a broader survey of U.S. households, the overall unemployment rate fell from a seasonally adjusted 6.2% to 6.1% of the labor force.
Labor Department analysts believe the survey of businesses provides a more reliable picture of the jobs market than the household survey.
"The unemployment rate seems to be more of an aberration than anything else," said Steve Gallagher, economist at SG Cowen Securities.
The survey of businesses showed job cuts were heavy again in manufacturing, a sector that has suffered the brunt of the economic downturn that began in March 2001. President Bush on Monday announced he was creating an assistant secretary of Commerce position to focus on revitalizing that part of the economy.
The White House said Friday it saw "promising" signs of economic growth despite the jobs report.
"There are are number of promising signs in the economy. ... But there is more we need to do to get the economy growing even faster. The president is not satisfied," White House spokesman Scott McClellan said.
Hiring in health care and construction helped offset losses in factories and other industries, such as information, professional and business services and government, Friday's report said.
Friday's reports no longer reflected a cyclical economy trying to add jobs after a recession — "which is depressing," said Sung Won Sohn, chief economist at Wells Fargo.
Deeper concerns now are focused on long-term structural problems in the economy, such as a flood of U.S. jobs going overseas. "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 high-paying — will be lost to other countries by 2015. The economy is growing, but demand is being filled from overseas, Sohn said. Also, because of that increasing global competition, businesses are holding down costs by not hiring U.S. workers.
If hiring doesn't improve, the recovery could be in jeopardy because consumers worried about job prospects will stop spending. Consumer spending has been the driving force in the U.S. economy.
Treasury Secretary John Snow said the jobs report signals the need for Congress to step up efforts to give employers the confidence to hire workers.
"Today's unemployment numbers mean we need to do more to strengthen the environment for job creation," he said in a statement.
President Bush wants Congress to pass energy legislation and provisions left out of this year's tax cut bill. The president has also said limiting damage awards on civil lawsuits and making tax cuts already enacted permanent will create new momentum for hiring.
Last month, the number of people in the labor force remained largely unchanged, with just 10,000 giving up on job searches. The labor force is comprised of those working or looking for work.
Nearly 2 million people in August were unemployed 27 weeks or more, representing nearly 22% of jobless workers. Those figures were similar to July's numbers.
The number of worker hours averaged 33.6 a week in August, same as in July. Analysts were expecting the average workweek to rise to 33.7 hours.
Lack of growth in the workweek is a disappointing sign for the future. When companies are poised to hire, they often increase the hours of workers currently on staff.
A recent string of better than expected data on retail sales, durable goods, consumer sentiment and housing had led economists to believe the tough labor market might start to improve.
The Labor Department said the Aug. 14 electricity blackout, which hit the Northeast and upper Midwest United States during the survey week, probably had little impact on the numbers.
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