U.S. April Jobless Rate Rises to 6%; Economy Loses 48,000 Jobs
By Carlos Torres
Washington, May 2 (Bloomberg) -- The U.S. jobless rate rose in April to tie an eight-year high of 6 percent and the economy lost jobs for a third straight month, signs that businesses weren't confident of improving sales after the Iraq war.
Companies eliminated 48,000 jobs last month and the unemployment rate tied the rate reached in December, which was the highest since August 1994. Payrolls fell by 124,000 in March and 357,000 in February.
Weak demand and concerns about war and terrorism have prompted factories and airlines to cut payrolls to control costs. Continued job losses may threaten consumer spending, which accounts for 70 percent of the economy.
``We are currently skating on very thin ice,'' said Jan Hatzius, a senior economist at Goldman Sachs & Co. in New York, before the report. ``Repeated payroll declines are usually an indication of serious trouble.''
Only once since the end of World War II has the economy lost jobs in three consecutive months when it wasn't in recession, during a steel industry strike in 1952. The latest jobs figures are likely to figure in the debate between Congress and President George W. Bush about how much to cut taxes.
And while Federal Reserve policy makers aren't forecast to lower interest rates at their meeting on Tuesday, they may take a step in that direction by stating that the greatest risk to the economy is slow growth, some economists said.
``We need to remain mindful of the possibility that lingering business caution could be an impediment to improved economic performance,'' Fed Chairman Alan Greenspan told lawmakers on Wednesday.
Jobs Report
Economists had expected payrolls to fall by 60,000 last month following a previously reported decrease of 108,000 in March, based on the median of 67 forecasts in a Bloomberg News survey. The jobless rate was expected to rise to 5.9 percent.
``This is the smallest decline in three months, so that's the upside,'' said David Resler, chief economist at Nomura Securities International Inc. in New York, before the report.
Manufacturers lost 95,000 jobs last month, the most since January 2002 and the 33rd straight decline. The manufacturing workweek fell to 40.5 hours from 40.8 in March and overtime dropped to 3.9 hours from 4 hours.
Average weekly hours worked declined to 34 hours from 34.3 in March. Economists had expected hours would fall to 34.2 hours, according to the Bloomberg News survey.
Incomes rose last month. Workers' average hourly earnings rose 0.1 percent, or 2 cents, in April, matching the previous month's increase. Economists had expected a 0.2 percent increase in hourly wages. Average weekly earnings fell to $513.74 last month from $517.59 in March.
Service Industries
Employment in service-producing industries, which include retailers, banks and government agencies, rose 25,000 last month after dropping by 100,000 the previous month. The increase was led by a 32,000 rise in government jobs.
The economy grew at a 1.6 percent annual pace in the first three months of the year as consumer spending rose at a 1.4 percent pace. Spending hadn't been weaker since the first quarter of 1993.
Sluggish demand had left automakers with too much inventory, forcing them to close plants temporarily to trim production and curtail stocks. General Motors Corp., Ford Motor Co., and DaimlerChrysler AG's Chrysler unit, closed 6 plants in the U.S. during the week of April 7, which corresponds to the week the Labor Department took its survey. That left over 15,000 workers temporarily unemployed during the week.
Greenspan is confident that demand will rebound now that the fighting in Iraq has ended and consumer confidence is bouncing back, particularly with the benchmark overnight bank lending rate at a 41-year low of 1.25 percent.
Tax Cuts
The current rate of unemployment is a ``temporary phenomenon,'' Greenspan said this week. ``As you look across the spectrum of most economic analysts, even though we and they don't see the immediate effects of the end of Iraqi war, most people have fairly strong increases in demand and enough to cause a marked increase in the level of employment.''
Bush, however, has argued the continuing job losses are reason for Congress to pass tax cuts of at least $550 billion. The Senate has agreed only to $350 billion.
And companies are still looking to keep costs down by relying on increasing productivity rather than hiring more staff. Over the 12 months ended in March, productivity grew 2.3 percent while the economy expanded 2.1 percent, suggesting that productivity gains were responsible for almost all growth.
``Our total employee count is stable to declining,'' William Hecht, chief executive officer of Pennsylvania utility owner PPL Corp., said in an interview this week. ``We continue to find more efficient ways to do our business and take advantage of attrition in the work force.''
War's Impact
The payroll numbers may also have been depressed by the activation of civilian workers for military duty. Defense Department figures show the U.S. ordered 32,594 reservists to mobilize from mid-March to mid-April, the period corresponding to the Labor Department survey.
The government instructs companies to exclude from their payroll counts workers called up to serve in the armed forces because they are no longer in the civilian labor force. The U.S. ordered 38,340 reservists to mobilize from mid-February to mid- March, during the previous Labor survey period.
Once workers are fired it's getting harder to find other employment. The percentage of workers unemployed for 27 weeks or more jumped to 1.9 million last month from 1.79 million in March.
The percentage of the population in the labor force rose to 66.4 percent from 66.2 percent the previous month, which was the lowest in nine years.
Among blacks, the unemployment rate rose to 10.9 percent from 10.2 percent in March. The jobless rate for Hispanics held at 7.5 and rose for whites to 5.2 percent from 5.1 percent.
For teenagers, unemployment rose to 18 percent in April from 17.7 percent. The jobless rate for women rose to 5.1 percent from 5 percent, while the jobless rate for men increased to 5.6 percent from 5.3 percent.
Last Updated: May 2, 2003 08:29 EDT
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