Jobless Rate in U.S. Remained at 4.5% in July; Economy Lost 42,000 Jobs

greenspun.com : LUSENET : Unk's Wild Wild West : One Thread

http://quote.bloomberg.com/fgcgi.cgi?ptitle=Top%20Financial%20News&s1=blk&tp=ad_topright_topfin&refer=topfin&T=markets_bfgcgi_content99.ht&s2=blk&bt=ad_position1_topfin&middle=ad_frame2_topfin&s=AO2rCzxQBVS5TLiBF

Link

08/03 13:44

U.S. Economy: Jobless Rate Holds at 4.5% in July (Update1)

By Siobhan Hughes

Washington, Aug. 3 (Bloomberg) -- The U.S. unemployment rate stayed at 4.5 percent in July, lower than expected, as factories eliminated fewer jobs and service companies added workers, government figures showed today.

``We still have a weak economy, but the employment situation is holding rather than deteriorating,'' said Gary Thayer, chief economist at A.G. Edwards & Sons Inc. in St. Louis.

Treasury securities fell as the Labor Department report suggested Federal Reserve policy makers may be almost finished reducing interest rates because the economy is showing the first signs of a rebound later this year.

Retailers such as Best Buy Co. Inc. are hiring workers for new stores. Cisco Systems Inc., the largest maker of computer networking equipment, says it has completed most of the job cuts announced earlier this year.

Payrolls fell by 42,000 in July after dropping by 93,000 a month earlier. While manufacturing employment declined for a 12th month, the factory job loss was the smallest since December, and automakers increased hiring. Analysts had expected the jobless rate to rise to 4.7 percent.

Unemployment has been either 4.4 percent or 4.5 percent since April, after rising from a 30-year low of 3.9 percent last September and October. The jobless rate is based on a survey of 60,000 households, while the job numbers are based on a survey of businesses. That helps explain why unemployment can hold steady as payrolls fall.

Unemployment May Rise

Workers' average hourly earnings rose in July, gaining 0.3 percent, or 4 cents, after rising 0.5 percent in June. Earnings rose 4.4 percent from July 2000, the largest year-over- increase since April 1998. Average weekly earnings rose to $490.77 from $489.40.

Gains at health-care providers and engineering and management companies led the increase in service industry employment. Still, the rise of 5,000 service jobs was the smallest since August 2000. One reason was a 10th straight decline in employment at providers of temporary help, whose customers often are manufacturers.

U.S. business other than manufacturing contracted in July for the third time in the last four months, a survey by the National Association of Purchasing Management showed. The group's non- manufacturing business index fell to 48.9 from 52.1 as new orders dropped.

Unemployment Expected to Rise

Unemployment may still rise as high as 5 percent by the end of the year, the Fed and other analysts forecast. Makers of communications and networking equipment are still eliminating workers. Also, the level of employment in services has held at about 107 million since March.

The stronger-than-expected jobs report sent the price of the Treasury's 10-year note down 1/16 point, pushing up its yield 1 basis point to 5.16 percent.

Analysts have been expecting Fed policy makers to cut interest rates for a seventh time this year when they meet Aug. 21. The overnight bank lending rate, at 3.75 percent, is already the lowest in more than seven years.

A Fed forecast before the report suggests that unemployment will rise to between 4.75 percent and 5 percent this year. ``We are not free of the risk that economic weakness will be greater than currently anticipated, and require further policy response,'' Fed Chairman Alan Greenspan told lawmakers last month. ``Softer job markets could induce a further deterioration in confidence and spending intentions.''

Electronics Jobs Decline

The economy grew at a 0.7 percent rate in the second quarter, the slowest in more than eight years. It marked the fourth straight quarter of growth below 2 percent, which hasn't happened since the last recession in 1990-1991.

Declines in business spending led Corning Inc., the No. 1 maker of glass used in fiber-optic networks, to say last month it would shed 1,000 jobs to trim costs. The cuts are on top of 4,900 workers already fired or notified this year. Hewlett-Packard Co. said last week it would fire 6,000 workers as the second-biggest computer maker sold fewer printers and computers than expected. The company has already cut 1,000 jobs this year.

``This slowdown that we have is still characterized by a fairly sharp downturn in high-tech manufacturing,'' Fed Bank of Dallas President Robert McTeer said today. At the same time, ``the broader service economy has been strong enough to sustain'' the U.S. expansion and limit increases in joblessness.

Reduced Earnings Fuel Layoffs

Earnings declines have been behind the reductions in investment and payrolls.

U.S. corporate profits fell more than 16 percent in the second quarter, which ended in June, based on reports from 424 companies in the Standard & Poor's 500 Index, according to Thomson Financial/First Call. The decline was the biggest since an 18 percent drop in the third quarter of 1991.

Average earnings in the third quarter are projected to fall by 12 percent from a year earlier, according to the business research firm. Fourth-quarter profit is expected to increase 0.4 percent. Some analysts said estimates for both quarters will be reduced in the next few weeks.

Factories, led by makers of electrical equipment and industrial machinery, cut 49,000 jobs after eliminating 113,000 a month earlier. Those two industries have lost 247,000 jobs this year, accounting for 40 percent of the decline in manufacturing payrolls.

Makers of automobiles and auto parts increased employment by 11,000, bringing the number of jobs to 945,000, the highest since April.

Black, Hispanic Unemployment Decline

Temporary help agencies lost 42,000 jobs in July.

The pool of available workers -- which combines the number of unemployed job seekers, plus those not looking for work in the last 12 months who said they would take a job -- shrank to 10.9 million in July from 11 million in June.

The percentage of the U.S. population holding jobs rose to 63.9 percent in July from 63.7 percent in June, the department also said. Average weekly hours worked were unchanged at 34.2, as was manufacturing overtime at 3.9 hours.

Among blacks, the unemployment rate dropped to 7.9 percent from 8.4 percent in June. The jobless rate for Hispanics fell to 6 percent from 6.6 percent.

For teenagers, unemployment rose to 14.8 percent from 14.3 percent in June. The jobless rate for women rose to 3.9 percent in July from 3.8 percent. The jobless rate for men fell to 3.9 percent from 4 percent.

-- (M@rket.trends), August 03, 2001


Moderation questions? read the FAQ