Nation's jobless rate decreases; payrolls drop again

WASHINGTON -- The nation's unemployment rate dipped to 6.2 percent in July, but businesses cut jobs for a sixth month in a row, still wary despite signs the economy is on the mend. With jobs scarce, close to half a million people gave up looking.

The Labor Department's report Friday suggested that the job market remains stubbornly sluggish, frustrating jobseekers on Main Street, discouraging investors on Wall Street and polarizing lawmakers in Washington as they look for a way to get the economy back to full throttle.

Employers chopped 44,000 jobs in July, which brought losses since January to 486,000. Economists had been saying the statistics might show positions had been added, perhaps as many as 10,000.

"Employers remain skeptical. While there are clearly some hopeful signs that the economy is improving, they want to be ... sure that it is not just a flash in the pan," said Ken Mayland, president of ClearView Economics. "Corporate hiring managers want to see a track record of growth before they make permanent new hires."

The jobless rate declined to a two-month low of 6.2 percent from a nine-year high of 6.4 percent in June. The drop, however, reflected people leaving the work force, not a burst in hiring. The civilian labor force declined by 556,000 during the month as people left for any number of reasons.

The report also identified 470,000 people in July who were not currently looking for work because they were discouraged over job prospects. That was up from 405,000 in July 2002 but down slightly from the 478,000 discouraged people reported for June.

On Wall Street, the employment report pulled stocks lower. The Dow Jones industrials lost 79.83 points to close at 9,153.97.

The lackluster job market, however, hasn't stopped shoppers, the main force keeping the economy afloat, from ringing up retailers' cash registers. Consumer spending and Americans' incomes each rose by a modest 0.3 percent in June, the Commerce Department reported.

Another report offered a fresh sign of healing in the economy: Manufacturing expanded in July for the first time in five months. The Institute for Supply Management's manufacturing index rose to 51.8 in July, up from 49.8 in June. A reading below 50 indicates that manufacturing activity is slowing, and a reading above 50 indicates it is growing.

With some scattered signs of an economic revival, analysts believe the Federal Reserve probably will hold a vital short-term interest rate at a 45-year low of 1 percent at its next meeting on Aug. 12.

President Bush, mindful of the political defeat his father suffered in 1992 owing to a weak economy, pushed for a third round of tax cuts, passed by Congress in May, to bolster the economy. The administration insists the fresh $330 billion package along with previous tax cuts will help the economy grow and eventually create jobs.

"There's still too many people looking for work, so we keep working on the economy until people can find a job," Bush said Friday. Noting that people have additional money from earlier tax cuts and the child tax credit, Bush said: "This will enhance demand for goods and services, which will make it more likely someone will find work."

Democrats say the tax cuts have not energized the job market, have benefited mainly the wealthy and are helping to plunge the federal budget deficit into a record amount of red ink this year and next.

"President Bush's misguided economic policies have failed to create jobs," said House Democratic leader Nancy Pelosi of California. "Since President Bush took office, the country has lost 3.2 million jobs, the worst record since President Hoover," she said.

Manufacturers, hardest hit by the 2001 recession, continued to hemorrhage jobs. The sector lost 71,000 positions in July, marking the 36th month in a row of job losses. Retailers, normally the engine of job growth, cut 14,000 positions in July, and education and health services lost 1,000.

In a glimmer of hope, though, temporary help firms saw employment go up by nearly 42,000 in July from the previous month. Economists said companies often are more inclined to use temporary workers to meet their needs before making a commitment to hire full-time workers.

Federal Reserve Chairman Alan Greenspan and private economists believe the economy will stage a material rebound in the second half of this year. Some economists are predicting a growth rate in the second half in the range of 3.5 percent to 4 percent or more.

Even if that should turn out to be the case, it would take time for the job market to show real improvement, economists said. Some economist believe the jobless rate could move higher in the months ahead because job growth probably won't be strong enough to handle an expected influx of people looking for jobs amid an improved economic climate.

Risks remain. "If the job market continues to struggle, consumers will pull back," said Mark Zandi, chief economist at Economy.com. "The economy is fragile."

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On the Net

Employment report: www.bls.gov/