U.S. companies cut jobs for seventh month, raising unease about
WASHINGTON -- U.S. companies slashed payrolls for a seventh straight month in August, raising new worries that a weak jobs market could shackle the budding economic recovery despite a slight improvement in the overall unemployment rate.
Payrolls fell by 93,000 last month after a loss of 49,000 jobs in July, the Labor Department reported from its survey of U.S. businesses. Analysts had expected an improving economy to create 12,000 jobs.
"This suggests that we may be further than we thought from a truly sustainable economic recovery," said Bill Cheney, chief economist at John Hancock Financial Services Inc.
Based on a separate survey of households, the unemployment rate fell in August to 6.1 percent from 6.2 percent. Labor Department analysts said they believe the payroll statistics from the survey of businesses provides a more accurate picture of the economy because the survey the figures were based on a larger sample.
On Wall Street, the disappointing report sent stocks lower. The Dow closed down 84 points, and the Nasdaq fell almost 11 points.
Recent economic data had suggested the economy was perking up: many retailers reported robust August sales, construction spending was up and manufacturers saw demand for their products sharply rise.
Improvements have failed to trickle down to the jobs market, however. Businesses remain extremely cautious about hiring and are holding down costs by doing more with fewer workers. That huge rise in productivity is to blame for some of the job losses.
Also worrisome is that layoffs occurred in a range of industries last month. Hiring was reported in health care and construction, but the gains were too small to offset losses in manufacturing, business services and government.
The longer companies put off hiring, the more the recovery is at risk, economists say. People worried about their jobs stop spending, and consumer spending has been the major driver of the economy.
"I don't think the recent revival in the economy is sustainable unless we see some job growth soon," said Mark Zandi, chief economist at Economy.com. "We need to see those jobs to help pick up the slack when the benefits of tax cuts and interest rates begin to fade early next year."
Continued job losses could spell problems for President Bush as polls show the economy is replacing terrorism and Iraq as the top concern for likely voters. The loss of more than 3 million jobs since Bush took office is giving Democrats ammunition heading into next year's election campaign.
"At this rate, there will be only one job left to cut by November 2004: George Bush's," said Sen. Joe Lieberman, D-Conn., one of nine Democrats vying to challenge Bush.
The president, mindful that his father lost re-election in a bad economy, made three separate trips to middle America this week to talk about the economy and defend his tax cuts.
"The economy is growing, but we want to see it grow even faster," White House spokesman Scott McClellan said Friday, noting that job growth often is the last to rebound.
Many economists now believe the lack of new jobs means structural changes are occurring in the economy instead of cyclical ups and downs. The United States is losing market share to global competitors.
In short, a flood of jobs is going overseas and will not be replaced, said Sung Won Sohn, chief economist at Wells Fargo.
"We have simply seen the tip of the iceberg," Sohn said. "I think it will get worse, not better."
Some reports estimate 5 million jobs, many of them high-paying, will be lost to other countries by 2015.
Manufacturing has lost nearly 16 percent of its work force, or 2.7 million jobs, in a record 37 straight months. Another 44,000 jobs were lost last month.
National Association of Manufacturers President Jerry Jasinowski called Friday's jobs report lousy, saying it should serve to spur policy-makers into action.
"The economic strength of our country is built upon our manufacturing base, and we are in danger of losing our best people and our productivity," he said. "We cannot maintain strong economic growth without a strong manufacturing base."
Bush announced Monday that a Commerce Department assistant secretary post was being assigned to focus on revitalizing that part of the economy. Treasury Secretary John Snow traveled to Beijing this week to urge officials there to let China's currency trade freely on world markets but got no firm commitments.
Business leaders say China's fixed exchange rate amounts to a protectionist attempt to keep down the prices of China's exports in world markets. The Chinese government says it's simply good financial sense.
With other parts of the economy on the mend, economists still think the Federal Reserve will hold a key short-term interest rate steady at a 45-year low of 1 percent when it meets Sept. 16. If the jobs market doesn't improve, however, analysts don't rule out another Fed rate reduction later.
"Another month like this and rate cuts will definitely be back on the table," Cheney said.