Double Trouble For U.S. Economy

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Double Trouble For U.S. Economy

Unemployment Rate Rises To 4.5 Percent In June

Economy Loses 114,000 Jobs During The Month

WASHINGTON, July 6, 2001 AP (CBS) The stuttering U.S. economy showed further weakness in June, with the government reporting that 114,000 Americans lost their jobs during the month and that the unemployment rate had edged higher to 4.5 percent.

Manufacturers continued to suffer heavy job losses, and demand for workers in service industries fell to the lowest level in 10 months.

The Labor Department said the jobless rate rose 0.1 percentage point from a 4.4 percent rate in May. The 4.5 percent level matched the unemployment rate in April, with both months representing the highest level the jobless rate has reached in the year-long economic slowdown.

Businesses slashed payroll for the second time in three months, cutting 114,000 jobs in June, after a reduction of 165,000 jobs in April. Payrolls had only edged up by 8,000 in May.

The closely watched report showed average hours worked remained steady in June at 34.3 hours per week. Inflation pressures appeared to be relatively muted as workers' wages grew 0.3 percent to $14.29 in June from $14.25 in May.

To stave off recession, the Federal Reserve has cut interest rates six times this year. The most recent cut, by a quarter-point, came last week. Each of the other five were by bolder half-point moves.

Economists are predicting that final figures will show that the economy barely grew in the recently ended April-June quarter.

"The economy has clearly stalled, and at best grew close to zero in the second quarter," said Alan Ruskin, research director at 4Cast Ltd. in New York.

Still, many are hopeful that growth will begin to rebound this summer as the Fed's credit-easing campaign and Congress' tax-refund checks take hold.

Even if this optimistic forecast proves correct, the unemployment rate, which is a lagging economic indicator, is expected to continue rising, topping 5 percent by the end of the year.

Unemployment At A Glance The jobless rate for blacks jumped to 8.4 percent in June, from 8.0 percent in May.

The rate for Hispanics climbed to 6.6 percent from 6.2 percent.

The unemployment rate for whites rose to 4.0 percent, compared with 3.8 percent.

The jobless rate for adult women held steady at 3.8 percent, while the rate for adult men edged up to 4.0 percent from 3.9 percent.

The rate for teen-agers shot up to 14.3 percent from 13.6 percent. (AP) While this jobless rate would still be low by historical standards, it would mark a sharp deterioration from the three-decade low of 3.9 percent hit in several months last year.

Job losses in June were led by a sharp decline of 113,000 jobs in manufacturing, which has suffered 785,000 job losses over the last 12 months, with three-fourths of those losses occurring since January.

For June, the industries suffering the biggest losses were computer-related. Electronic equipment makers cut 31,000 jobs. Industrial machinery makers cut 22,000 positions.

Even the service sector, where most Americans work, was weak in June, managing an increase of only 5,000 jobs, the poorest showing since an outright loss of 15,000 jobs in August 2000.

Much of the weakness was centered in firms providing temporary workers, which suffered a ninth consecutive monthly decline in June. The temporary help industry has lost a total of 379,000 jobs in the last nine months.

The weakness at temp firms, hotels and amusement parks was offset slightly by strong job gains in health services and engineering.

Some economists fear that if the employment climate worsens seriously, consumers — who have been keeping the economy afloat — might sharply cut back spending and tip the country into recession.

This fear so far has not been realized as the consumer sector has been the main source of strength keeping the economy afloat. Just this week Detroit reported that auto sales rebounded in June.

Treasury Secretary Paul O'Neill said Thursday that the strength in auto sales and housing gave him hope that the economy will recover in coming months, helped by President Bush's tax cut and the series of rate reductions by the Federal Reserve.

http://cbsnews.cbs.com/now/story/0,1597,300092-412,00.shtml

-- Martin Thompson (mthom1927@aol.com), July 06, 2001

Answers

Double Trouble? Lets add to the list, 1. global economic recession conditions developing rapidly with Japan, the second largest economy leading the way. 2. energy costs out of control 3. inflation out of control despite what the government says 4. savers being punished with very little reason to save i.e. interest rates 5. mortgage rates static or rising despite Feds efforts 6. Extreme overcapacity in many industries 7. too many companies and individuals carrying too much debt 8. record amount of bankruptcies and bonds in default 9. lenders reluctant to lend (see BankOne story) 10. Corporate profits dropping rapidly thereby causing kneejerk reaction of spending less on capex in order to protect bottom line.

I think double trouble is an understatement.

-- Guy Daley (guydaley1@netzero.net), July 06, 2001.


P.S. Forgot to mention the strength of the dollar which has a major impact on our international corporations.

-- Guy Daley (guydaley1@netzero.net), July 06, 2001.

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