U.S. Payrolls Fell 30,000 in June; Jobless Rate Rose to 6.4%
July 3 (Bloomberg) -- The U.S. economy lost jobs in June for a fifth month and the jobless rate rose to a nine-year high of 6.4 percent as slow growth forced companies to fire workers.
Companies eliminated 30,000 jobs after a revised 70,000 were lost in May, more than four times the number originally reported last month, the Labor Department said in Washington. The jobless rate rose from 6.1 percent and was higher than the 6.2 percent median forecast. The rate was the highest since April 1994.
The economy has lost 394,000 jobs since the end of January and grew at a 1.4 percent annual pace for a second consecutive quarter from January to March. Effects of the war with Iraq also restrained growth in the three months that ended Monday, and the economy needs to grow more than twice as fast before hiring starts to pick up in earnest, economists said.
``It's still a pretty rough labor market,'' John Shin, an economist at Lehman Brothers Inc. in New York, said before the report. Rising unemployment ``is a key reason why growth isn't going to take off in the second half of the year'' and with jobs hard to get, ``spending will suffer.''
In a separate report this morning, the Labor Department said initial jobless claims unexpectedly rose 21,000 to 430,000 in the week ended Saturday. The four-week moving average of claims, a less volatile indicator, fell 4,500 to 425,000.
``Major layoffs persist in corporate America, and short of that, companies continue to delay new projects and activities that prompt large-scale job creation,'' said Carl Camden, president of global staffing at Kelly Services Inc., the second-largest U.S. temporary-employment company. ``They want unambiguous evidence that this recovery is real and has traction.''
Forecasts
Economists had expected payrolls would hold steady last month following a previously reported decrease of 17,000 in May, according to the median of 71 forecasts in a Bloomberg News survey. They projected the unemployment rate would rise a tenth of a percentage point to 6.2 percent.
The unemployment rate may have peaked, according to the latest Bloomberg monthly survey of economists. The jobless rate is forecast to average 6.1 percent in the third quarter before falling in the final three months of 2003 to 6 percent, according to the median of 55 estimates.
Manufacturers lost 56,000 jobs last month, the 35th straight decline. Since a recent peak in July 2000, factory employment has fallen by more than 2.6 million to 14.7 million. The manufacturing workweek held at 40.2 hours and overtime was unchanged at 4 hours.
Employment in service-producing industries, which include banks and government agencies, rose 10,000 last month after falling 54,000 the previous month. The increase was led by education and health services. Retail employment fell 13,000.
Employment at temporary-help agencies such as Kelly Services rose 38,000 after a 44,000 rise in May, according to the report.
The Institute for Supply Management's June employment index rose to 46.2 from 43 the previous month, the Tempe, Arizona-based industry group said yesterday. While a number less than 50 signals jobs are being cut, the reading was the highest since January.
Firings Continue
3Com Corp., the world's No. 3 maker of computer-networking equipment, last week reported a fourth-quarter loss as sales fell. Earlier in the month, the Santa Clara, California-based company announced it would eliminate about 400 jobs, a 10 percent reduction, in the next six months. The company had pared its workforce in half in 2001, to 6,000 from 12,000, and has since cut another 35 percent bringing the number of workers to 3,900 at the end of February.
The economy probably grew at a 2 percent annual pace in the second quarter, according to the median estimate in a Bloomberg News survey of 60 economists from June 25 to July 2. Economists estimate the economy needs to grow 3 percent or faster to prompt hiring, something it hasn't done in consecutive quarters since the last six months of 1999.
Growth Forecast
Stronger growth may be on the horizon, some economists said. Growth is projected to accelerate to 3.5 percent during the current quarter and reach 3.7 percent in the last three months of the year, according to the Bloomberg survey median.
``The most important thing to the consumer ultimately is whether he or she is employed,'' Shin said.
The lack of jobs is also restraining consumer confidence. The Conference Board's index of confidence was 83.5 last month compared to 83.6 in May as views on the present conditions deteriorated because of job losses, the New York-based research group said last week. The percentage of people that said jobs were currently plentiful fell to 11.4 percent, the lowest since January 1994.
Average weekly hours worked for all employees held at 33.7 hours, today's report showed. Economists had expected hours would rise to 33.8 hours, according to the Bloomberg News survey.
Incomes increased last month. Workers' average hourly earnings rose 0.2 percent, or 3 cents. Economists had expected a 0.3 percent increase in hourly wages. Average weekly earnings increased to $518.31 last month from $517.30 in May.
``The people you are still working have a lot more money to spend'' and that is helping to support the economy, said Vincent Boberski, a senior economist at RBC Dain Rauscher Inc. in Chicago, before the report. ``People are still confident enough about keeping their jobs that they are willing to go out and spend.''
Among blacks, the unemployment rate rose to 11.8 percent from 10.8 percent in May. The jobless rate for Hispanics increased to 8.4 percent from 8.2 percent and for whites rose to 5.5 percent from 5.4 percent.
For teenagers, unemployment increased to 19.3 percent last month from 18.5 percent. The jobless rate for women rose to 5.2 percent from 5.1 percent. The jobless rate for men increased to 6.1 percent from 5.9 percent.
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