Jobless rate rises to 4.9% - a four year high - economist says it is a disaster. It does seem like a disaster for the Bush Administration. Another Bush Recession - ugh!
09/07 09:19
U.S. August Jobless Rate Rises to 4.9%, a 4-Year High (Update1)
By Carlos Torres
Washington, Sept. 7 (Bloomberg) -- The U.S. unemployment rate jumped to a four-year high of 4.9 percent in August as factories dismissed twice as many workers as in the previous month, the Labor Department reported.
``It's a disaster,'' said Scott Brown, an economist at Raymond James & Associates in St. Petersburg, Florida. ``The report suggests the labor market is a lot weaker than we may have thought.''
The increase from 4.5 percent in July brought the unemployment rate to the highest since it was also 4.9 percent in September 1997. Payrolls fell by 113,000 in August, led by the biggest drop in factory employment since July 1998. Unemployment among blacks rose to a three-year high.
Intel Corp., the biggest chipmaker, has been dismissing workers at a faster pace than expected, chief Financial Officer Andy Bryant said yesterday. Gateway Inc. announced new rounds of job cuts last week in order to preserve profits as demand slows. Ford Motor Co. is eliminating office workers as well as idling production employees.
Bonds surged after the report suggested that Federal Reserve policy makers will reduce the overnight bank lending rate again next month. ``It almost assures a 25 basis point cut on Oct. 2,'' said David Orr, chief economist at First Union Securities in Charlotte.
Factory Employment Plummets
Analysts had expected a jobless rate of 4.6 percent in August and a decrease of 45,000 jobs after July's previously reported loss of 42,000 positions, according to a Bloomberg News survey. Total employment had risen by 13,000 in July, the revised numbers show, and had fallen by 99,000 in June.
Factory employment dropped by 141,000 in August, after a 71,0000 decrease a month earlier. It was the 13th consecutive decline, reflecting a slump that began last year.
Services employment rose, led by hiring at hospitals and other health care providers. The August increase of 23,000 followed a gain of 74,000 in July. Even so, retail employment fell by 26,000 in August. That followed an increase of 35,000 in July.
Construction employment rose by 5,000 after rising by 9,000 in July.
Intel planned 5,000 job cuts this year after demand for semiconductors slowed. Gateway, the second-largest direct seller of personal computers, said last week that it plans to cut about 5,000 jobs. Of those, 2,600 will be in the U.S.
Gateway, which has 20,000 workers, said it hopes to save $300 million a year.
Fed Concerns
Ford last month said it will eliminate 4,000 to 5,000 salaried jobs, or 11 percent of its U.S. office employees, by the end of the year to save money as sales and market share decline. Three-quarters of the positions will be eliminated through early retirement, which wouldn't directly affect employment figures.
The report showed there were 6.96 million unemployed workers in August, up 1.2 million from a year earlier. The pool of available workers, which combines the number of unemployed job seekers and those willing to work even if not actively pursuing employment, rose to 11.8 million from 10.9 million in July.
The percentage of the U.S. population holding jobs fell to 63.4 percent in August from 63.9 percent in July.
The number of unemployed is likely to increase concern among Fed officials. ``If more people start losing their jobs, consumer spending might well be reduced,'' said Michael H. Moskow, president of the Fed Bank of Chicago, in a speech last month. ``A rebound in production would be harder to bring about.''
Black Unemployment Surges
The Federal Open Market Committee has lowered the target for the overnight bank lending rate by 3 percentage points this year. Second-quarter growth of 0.2 percent at an annual rate was the slowest in eight years.
Reflecting expectations of further moves, the 10-year Treasury note rose 3/4 point, pushing the yield down 10 basis points to 4.77 percent.
Among blacks, the unemployment rate climbed to 9.1 percent, the highest since July 1998, from 7.9 percent in July. The jobless rate for Hispanics rose to 6.3 percent from 6 percent.
For teenagers, unemployment rose to 16.1 percent, the highest since September 1997, from 14.8 percent in July. The jobless rate for women rose to 4.2 percent in August from 3.9 percent. The jobless rate for men rose to 4.4 percent from 3.9 percent.
Factory Hours Decline
Manufacturing hours dropped to 40.7 in August from 40.9. Overtime rose to 4.2 hours from 4 hours in July. In all industries, hours worked were unchanged at 34.1.
Average hourly earnings rose 0.3 percent, or 4 cents, to $14.38 last month from $14.34. Analysts also expected a 0.3 percent increase in average hourly earnings. Earnings rose 0.2 percent increase in July. Average weekly earnings rose to $490.36 during August from $488.99 in July.
The slowing economy has also prompted companies to alter their hiring plans. A survey of 16,000 businesses by Manpower Inc. showed that 24 percent plan to hire workers during the October to December period, down from 32 percent a year earlier. ``We see no clear evidence of a trend reversal in hiring in the months ahead,'' said Jeffrey A. Joerres, chief executive of the Milwaukee- based employment firm. |
