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Jobless Rate Hovers Near 6%

Employers shed 93,000 more jobs in August, even as the economy continued to grow. Some experts see a new type of business cycle.

September 06, 2003|Peter G. Gosselin | Times Staff Writer

WASHINGTON — U.S. employers defied expectations last month and eliminated a net 93,000 jobs, leaving the nation's unemployment rate stubbornly stuck above 6%, the Labor Department said Friday.

The latest cuts, the steepest in five months, brought to 437,000 the net number of positions lost since the beginning of the year. The report bolstered evidence that the economy has entered a new phase in which growth fails to produce that most valuable of commodities -- new jobs -- or even preserve those that already exist.

"We've gone from having a jobless recovery to a job-loss one," said Milken Institute economist Ross C. DeVol. "With so many other indicators showing the economy picking up steam, we'd all expected to see some job gains. But that's not what we got."

The economy grew at a 3.1% annual pace in the second quarter, and analysts think the growth rate in the July-to-September period will be better than 5%. But in contrast to most other recoveries of the last half-century, the nation has lost 1.1 million jobs, rather than gaining them, since emerging from recession in late 2001.

Indeed, some economists believe that what is occurring is a qualitatively different kind of economic cycle than the nation experienced for most of the period since World War II. These economists say many more employers are engaged in the time-consuming and uncertain task of changing their businesses and the type of workers they hire.

The new pattern may keep employers lean and efficient, but it risks stranding more workers without the skills necessary for a new generation of jobs or the financial resources to wait and get trained.

The August jobs report that suggests such a change could hardly have landed at a more politically charged moment. With the traditional Labor Day opening of the presidential campaign season just past, Republicans and Democrats worked feverishly to spin the latest data in their favor.

President Bush, apparently focusing on a tenth-of-a-point drop in the unemployment rate from 6.2% in July to 6.1% last month, said the new report was welcome but more progress was needed.

"We've taken steps to get our economy growing again, and there are some very hopeful signs that progress is being made. I'm optimistic about the future of this country," Bush said during a visit to a trucking and warehouse company in Indianapolis.

But, he added, the report showed "we've got more to do.... I'm not going to be satisfied until every American who's looking for a job can find a job."

Democrats described the employment report as proof of the failure of the president's tax-cut-heavy policies. Sen. Joseph I. Lieberman (D-Conn.) issued a statement complaining about the latest job cuts.

"At this rate," he quipped, "there will be only one job left to cut in November 2004: George Bush's."

Investors reacted to the report Friday by pushing stock prices moderately lower on concerns that a lack of new jobs could damp consumer spending, which accounts for two-thirds of the nation's economic activity.

The Dow Jones industrial average lost 84.56 points, or 0.9% of its value, to close at 9,503.34. The broader Standard & Poor's 500 index dropped 6.58 points, or 0.6%, to 1,021.37, and the Nasdaq composite index fell 10.58, or a similar 0.6%, to 1,858.12.

Bond buyers, meanwhile, responded with relief, driving prices sharply higher and yields lower. The yield on the benchmark 10-year U.S. Treasury note -- a key gauge of the direction of interest rates -- fell to 4.35% from Thursday's close of 4.51%. Bond yields fell as the weak jobs report hinted at a slowing recovery and lower risk of inflation, which saps the value of fixed-income investments.

Most analysts had expected that with retail sales rising and factory orders picking up, the economy would have added 10,000 to 25,000 jobs last month, a modest number but still an improvement over recent losses.

But employers are able to produce more with fewer workers because of recent dramatic productivity gains, and are apparently concerned about the strength of the economic comeback. Their cut of nearly 100,000 jobs in August followed an upwardly revised 49,000 loss in July.

The government said this week that productivity, or output per hour of work, rose at a spectacular 6.8% annual rate in the second quarter.

Labor Secretary Elaine Chao sought to put a sunny face on the new numbers, describing the small drop in the jobless rate as "positive." But her own department's economists said the decline was statistically meaningless, and other analysts said it was largely the product of discouraged workers dropping out of the labor force.

Unemployment among traditionally disadvantaged African Americans slipped from 11.1% in July to 10.9% last month, and the rate for Latinos dropped from 8.2% to 7.8%, but Labor Department economists said these changes, too, were insignificant. About 8.9 million Americans were counted as unemployed during the month.

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