Jobless Rate Booms to Hoover Levels and Beyond
http://www.nytimes.com/2003/07/03/business/03CND-ECON.html?hpJuly 3, 2003
Jobless Rate Rises to 6.4 Percent; Highest in More Than 9 Years
By DANIEL ALTMANOnce again failing to live up to politicians' hopes and economists' expectations, the labor market got tougher for job seekers last month. The unemployment rate rose to 6.4 percent, the highest in nine years, and the economy lost 30,000 jobs.
The Labor Department also said that job losses were much more severe in May than originally reported — 70,000 outside of farming, rather than 17,000. In all, the economy has lost 236,000 jobs this year.
The figures were a gloomy conclusion to the first half of the year, especially given that the economy had shown a few positive signs in June. Economists said that hints of revival in both the manufacturing and service sectors might have lured job hunters into the labor market too soon.
Job losses occurred across almost all industries, but blacks had considerably more trouble finding work than whites. Many more people started looking for work, but the number of employed blacks shrank, while the number of employed whites grew.
"It's hard to put a positive spin on this report," said Ethan S. Harris, chief economist of Lehman Brothers. Not only did overall unemployment rise, he said, but "the rest of the report didn't look good, either." The unemployment rate in May was 6.1 percent.
The data put the White House on the defensive. Democrats charged that the latest package of tax cuts, signed by President Bush on May 28, had contributed little to the strength of the economy. [Page A14.]
"This is another indication that these ideologically focused, supply-side tax cuts are not the way to get at the fundamental problem," said Senator Jon Corzine, a Democrat from New Jersey. "It's increasingly becoming clear the policies aren't having the result that was, at least, their stated intention. These have been very inefficient uses of resources to try to stimulate growth or jobs."
Claire Buchan, a spokeswoman for the White House, responded by saying much of the boost that will come from the most recent fiscal package has yet to be felt. "The withholding tables went into effect the day before yesterday," she said. "The child-credit checks will go out at the end of the month. Businesses have access to the expensing and the depreciation, so there is a lot of stimulus."
The Labor Department's report includes data from separate surveys of households and business and government payrolls. According to seasonally adjusted numbers from the household survey, 611,000 people joined the labor force in June, yet the number of employed people rose by only 251,000.
Mr. Harris said part of that gap might reflect steep drops in payrolls from earlier this year — one survey catching up to the other. But he said encouraging signs coming from the economy might have been premature, at least for people seeking work.
"One thing I wonder about," he said, "is whether all the happy talk about the economy encouraged people to start job hunting again, only to find that the labor market wasn't nearly as strong as what they were hoping for."
The latest figures on new applications for unemployment benefits also offered little encouragement. Last week, 430,000 people filed first-time claims, up from a revised figure of 409,000 in the previous week, the Labor Department reported yesterday. Many economists regard any figure above 400,000 as a sign of continued weakness in the labor market.
Richard D. Rippe, chief economist of Prudential Securities, said that strong growth in jobs might not occur until the end of the year, because of increases in worker productivity.
"We can produce more output without adding a lot of workers," he explained. "What you're going to have to get is strong and consistent output growth before you're going to add workers. I don't think, even if the optimists on the economy are correct, that you're going to get strong job growth in the near term."
Last month's slackness in the labor market encompassed virtually all industries, with few noteworthy exceptions. Manufacturing suffered heavy losses of 56,000 jobs, while some of the largest gains came among restaurants and bars, which added 20,000 positions.
Much bigger differences arose between the employment of blacks and whites. Though the survey of households is considered a rougher picture than the survey of businesses, which does not tabulate workers by race, the figures from June sent a stark message. For every four white workers added to the work force in June, the number of employed whites rose by three. But for every four black workers added to the labor force, the number with jobs slipped by three.
In all, whites in the labor force rose by 461,000, and the number of employed whites rose by 321,000. But among blacks, 99,000 entered the work force, and the number of employed blacks fell by 73,000.
In the aftermaths of previous economic downturns, job opportunities for blacks have opened up more slowly than for whites, said William E. Spriggs, the executive director of the National Urban League Institute for Opportunity and Equality. This time, he said, blacks who lose their jobs seem less likely to drop out of the labor force and more likely to look for new ones. As a result, the unemployment rate — especially for black men — is rising.
"Given the high share of African-Americans that are long-term unemployed," Mr. Spriggs said, "it's just going to take a long time to clear that out." The Labor Department said that for blacks, the unemployment rate in June was 11.8 percent, up from 10.8 percent in May. For whites, it rose to 5.5 percent in June from 5.4 percent a month earlier.
In June, more than half of the unemployed had been looking for work for more than 12 weeks — the highest figure since May 1983. The average time spent unemployed reached almost 20 weeks, a level not seen since 1984.
Longer job searches by women, as well as by blacks, may account for the longer duration of unemployment, said Robert Shimer, a professor of economics at the University of Chicago. Women who lose jobs, he said, have also become less likely to leave the work force.
Mr. Harris, the Lehman Brothers economist, said that with so many people seeking jobs for so long, "it makes the threat of unemployment more dire" for anyone who loses a job now. Though the jobless rate typically lags behind other indicators of the economy's health, its upward creep, he said, could limit consumers' appetites for new spending.
Yesterday did bring one promising sign, however, as the Institute for Supply Management said that its index of activity in nonmanufacturing industries surged to 60.6 in June — a reading indicative of growth — from 54.5 in May. Mr. Rippe, of Prudential, asserted that the stage was set for better performance.
"We are getting through some of the past problems, and we have all of the policy dials that we have available set to growth," he said. "Everything we can do from a macro policy perspective is being done, and the question is, will it work? I think it will."
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