Unemployment expected to rise because of war fears
Iraq war fears darken U.S. jobs outlook--economists
Reuters, 03.05.03, 11:12 AM ET
By Joanne Morrison
WASHINGTON, March 5 (Reuters) - Fear of an impending U.S. war with Iraq and little profit improvement in the hard-hit manufacturing sector are likely to suppress hiring for a good part of this year, economists say.
Friday's closely watched employment report is expected to show that wary businesses indeed held off on hiring, and many economists believe the data to show businesses actually cut back on their payrolls.
"The best we can hope for is that the rate of the losses will slow," said Sung Won Sohn, chief economist at Wells Fargo in Minneapolis.
Economists in a Reuters poll forecast, on average, that the Labor Department report, due out Friday at 8:30 a.m. (1330 GMT), will show that businesses added a meager 8,000 jobs in February after a surprising 143,000 new jobs in January. The unemployment rate is expected to ratchet back up, hitting 5.9 percent after a brief fall to 5.7 percent in January.
"Companies do not appear to be laying off people at the same pace we had seen last fall, but selective cost cuts continue and at this point few companies are stepping up and hiring," said Lynn Reaser, chief economist at Banc of America Capital management in St. Louis.
However, a poor jobs outlook in the manufacturing sector signaled in the Institute for Supply Management's latest survey of purchasing managers has many economists now expecting no new hires any time soon in this beaten-down sector.
Alarming for an already grim jobs outlook, the ISM's employment index slumped to its lowest reading in a year, serving as a grim omen for the February payrolls report.
"(Manufacturers) are going to be trimming jobs through the middle of the year at the rate we are going on the manufacturing side," said Kurt Karl, chief economist at Swiss Re in New York.
In the Reuters poll, economists forecast that average hourly earnings rose by 0.3 percent in February after being unchanged a month earlier, while the average work week inched down to 34.1 hours from 34.2.
Still, concerns about such risks as a U.S. war with Iraq, potential homeland terror attacks, high energy prices and rising tensions with North Korea will likely keep companies in a wait and see mode, economists say.
"In the foreseeable future businesses will remain cautious and careful, not wanting to make any long-term commitments," said Sohn. "Once the war starts, that caution may increase and we will have to get a pretty good feel as to how the war is going to unfold before businesses start thinking about hiring people and buying equipment."
LAYOFF PLANS ON THE RISE
Amid growing war jitters, corporations have steadily been increasing the number of planned job layoffs, according to the latest study by Challenger Gray and Christmas, the Chicago-based outplacement tracking firm.
According to the firm's latest survey, planned job cut announcements last month rose 5 percent to 138,177 from January's 132,222. February's layoff announcements were up 8 percent from a year ago.
"It now appears that economic uncertainties and war talk have put the brakes on business spending plans and companies are once again in a serious cost-cutting mode," said John Challenger, chief executive of the firm.
He noted that job cut announcements rose 151 percent last October, about the time that the war signals from Washington began in earnest. "It is doubtful that a turnaround in hiring can be expected before fall, if then," Challenger said.
Going forward, hiring is not going to show much improvement, according to Milwaukee-based Manpower Inc.'s latest survey, which found that U.S. businesses in the second quarter will be hiring at a moderately slower pace.
"The survey results are clearly showing a dominating sense of uncertainty, as hiring intentions have dipped for the first time in over a year," said Jeffrey Joerres, chairman and chief executive of Manpower.
Of nearly 16,000 employers polled, 63 percent plan to maintain their current staff levels, that survey found. But in some sectors, including durable goods manufacturing, many expect to reduce hiring activity.
"It's clear that for at least a couple of months the manufacturing sector is still hurting on the profit side," said Swiss Re's Karl.
Copyright 2003, Reuters News Service |
