Payrolls plunge 101,000 led by retail
Jobless rate holds at 6 percent as expected
"The jobless rate, however, was unchanged
at 6 percent as more people abandoned
the job search."
…………………………………………….
" The economy has shed more than 2 million jobs since it hit a recession in 2001."
By Rachel Koning, CBS.MarketWatch.com
Last Update: 2:41 PM ET Jan. 10, 2003
marketwatch.com
WASHINGTON (CBS.MW) -- The U.S. economy shed an unexpected 101,000 jobs in
December as retailers hired fewer people for the holidays and factory positions were cut for
a 29th straight month.
Perhaps a bigger surprise to financial
markets, both November and October
payrolls were revised to show a dimmer
job market those months than
previously realized. Listen to Labor
Secretary Elaine Chao speak on the
latest figures.
Stock averages were pressured on the
surprising headlines. See Market
Snapshot. Bonds gained after falling for
much of the week. Read Bond Report.
"The reality isn't as bad as the figures,
but the reality isn't good either," said
Neil Soss, economist at Credit Suisse
First Boston.
The decline in December payrolls was
the largest one-month drop since
February, when 165,000 jobs were
eliminated.
Economists expected payrolls to
expand by 32,000 in the final month of
the year. Some also looked for
November's decline to be revised to
show fewer cuts. Instead, November job
cuts totaled 88,000, doubling the 40,000
lost jobs first reported. October's payroll
gain was revised to show a smaller
reading than previously reported.
The unemployment rate held steady at 6
percent in December, which was what
most economists expected. The
payrolls number is calculated from a poll
of businesses, while the jobless rate is
derived from a survey of households.
Seasonal factors
"Most of the decline is attributed to a
reduction in retail trade payrolls, an
artifact of seasonal adjustment
patterns," said Sophia Koropeckyj,
economist with Economy.com. "The
jobless rate, however, was unchanged
at 6 percent as more people abandoned
the job search."
"Despite modest growth in the spring
and summer of 2002, payroll
employment showed a net loss of
181,000 over the year," said Kathleen
Utgoff, commissioner of the Bureau of
Labor Statistics. Manufacturing jobs are
down nearly 600,000 on the year. Air
transportation lost a substantial 23,000 jobs in 2002.
The economy has shed more than 2 million jobs since it hit a recession in 2001.
"We've been out a recession for over a year now. Where's the job growth?" said Soss. He said the
impact war might have on business investment "is just an excuse," suggesting that a soured
corporate climate after high-profile scandals in 2001 and 2002 has had just as much impact on the
health of corporate borrowing and investment.
Most economists think job growth will be slow to recover this year, considering the labor market is
historically a laggard in a recovery. Further, tepid demand in many sectors, penny-pinching and a
productive workforce - perhaps worried about job losses -- has allowed companies to function with a
reduced staff.
Ed Peters, chief investment strategist at PanAgora Asset Management said aggressive capital
investment during the high-tech bubble means most firms aren't replacing their equipment at a rate
that would really help investment snap back. He does look for capital investment to improve modestly
in the coming year.
Most economists predict the jobless rate will hover near 6 percent at least until the middle of the
year. Soss suggests it could climb as high as 6.5 percent before retreating.
Factory, retail cuts
Manufacturing jobs fell by 65,000 in December - the 29th straight month for a decline. Construction
jobs rose a tepid 3,000, the government's report showed.
Retail employment plunged 104,000 in December as retailers hired fewer workers for the holidays
than in the past. Holiday sales results so far indicate the shopping season was below plan for many.
Bars and restaurants cut back their staffs significantly in December, the report showed.
Despite a 73,000 gain in services and 14,000 gain in government positions, the retail sector
weakness pushed total service-producing jobs down 104,000. Healthcare, real estate and financial
services - thanks to mortgage refinancings -- continue to buck the trend, showing relatively strong job
growth.
The number of Americans without a job for 27 weeks or longer continued to trend upward and stood
at 1.9 million in December.
However, the pool of available workers, which adds the number of unemployed job seekers and those
not looking for work in the last 12 months who said they would take a job, fell to 13 million in
December from 13.2 million in November.
For those still in the workforce, average hourly earnings expanded 0.3 percent in December as
expected. Over the year, average hourly earnings were up 3 percent.
Peters said wage growth is a promising sign for consumer spending.
Productive workforce
The overall workweek fell by six minutes to 34.1 hours. The factory workweek increased by 18
minutes to 40.9 hours in December, while factory overtime rose to 4.2 hours. That rate of increase
was essentially in line with increases seen throughout the year, Utgoff said.
Economists said the increase in factory hours despite layoffs points to increased industrial
production.
"If, as other data thus far suggest, December retail sales and industrial production show decent
increases next week, the Fed should be inclined to continue to hold off at its Jan. 28-29 meeting,
despite the dismal state of labor markets," said Jade Zelnick, chief economist at RBS Greenwich
Capital.
Many economists are betting the Fed leaves key interest rates at four-decade lows until at least the
middle of the year or until it sees more definitive signs capital investment has improved.
Rachel Koning is a reporter for CBS.MarketWatch.com in Washington.
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