U.S. Job Losses Increased in August, Unemployment Rose to 9.7%
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By Timothy R. Homan
Sept. 4 (Bloomberg) -- The U.S. jobless rate in August jumped to 9.7 percent, the highest since 1983, and employers cut another 216,000 jobs, highlighting threats to consumer spending.
The increase in the unemployment rate from 9.4 percent exceeded forecasts. The smaller-than-anticipated drop in payrolls was the least in a year, and followed a decrease of 276,000 in July that was larger than previously reported, Labor Department data showed today in Washington.
Rising joblessness underscores Treasury Secretary Timothy Geithner’s judgment that it’s “too early” to start exiting from the unprecedented stimulus measures helping stabilize the economy. AMR Corp. and Whirlpool Corp. are among the companies continuing to cut staff to lower costs and revive profits in the aftermath of the deepest recession since the 1930s.
“The labor market’s healing process is agonizingly slow,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, said before the report. “We expect the improvement to remain a very slow one, and therefore for the household sector to be contending with a weak labor market for some time.”
Revisions subtracted 49,000 from payroll figures previously reported for July and June.
The report comes hours before Geithner meets in London with finance ministers and central bankers from the Group of 20 emerging and developed nations.
While the G-20 gathering will discuss how policy makers plan to exit from their fiscal and monetary stimulus efforts, now isn’t the time to start pulling back, Geithner told reporters in Washington this week. “We’ve come a very long way but I think we have to be realistic, we’ve got a long way to go still.”
Past Recessions
Federal Reserve policy makers waited at least a year after unemployment peaked before raising interest rates in the aftermath of the previous two recessions.
The latest numbers brought total jobs lost since the recession began in December 2007 to 6.9 million, the biggest decline in any post-World War II economic slump.
Payrolls were forecast to drop 230,000 after a 247,000 decline initially reported for July, according to the median of 79 economists surveyed by Bloomberg News. Estimates ranged from decreases of 365,000 to 100,000. Job losses peaked at 741,000 in January, the most since 1949.
The jobless rate was projected to rise to 9.5 percent. Forecasts ranged from 9.3 percent to 9.8 percent. Economists surveyed by Bloomberg last month projected the jobless rate will reach 10 percent by early 2010 and average 9.8 percent for all of next year.
Discouraged Workers
Adjusted for part-time employees that would rather have a full-time job and for discouraged workers that are no longer looking for a job but would take one if it were available, the jobless rate jumped to 16.8 percent in August from 16.3 percent.
A rising jobless rate, stagnant wages and falling home values signal a lack of consumer spending may curb an economic recovery.
Today’s report showed factory payrolls fell by 63,000 after decreasing 43,000 in the prior month. Economists forecast a drop of 60,000. The decrease included a loss of 15,000 jobs in auto manufacturing and parts industries.
Announcements of staff reductions continued last month. Whirlpool, the world’s largest appliance maker, said Aug. 28 that it will close its Evansville, Indiana, manufacturing plant, resulting in the elimination of 1,100 jobs, or 1.6 percent of the company’s workforce.
Builders, Services
Payrolls at builders declined by 65,000 after decreasing 73,000. Financial firms decreased payrolls by 28,000, after a 17,000 loss the prior month.
Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 80,000 workers after falling 154,000. Retail payrolls decreased by 9,600 after a 43,200 drop.
Fort Worth, Texas-based American Airlines, a unit of AMR, said this week it will furlough 228 flight attendants and put 244 more on involuntary leave as part of the 1,600 job cuts it announced in June.
Government payrolls decreased by 18,000 after falling 28,000 the prior month.
Today’s report also showed the average work week held at 33.1 hours in August. Average weekly hours worked by production workers remained unchanged from the month before, at 39.8 hours, while overtime also held at 2.9 hours. That brought the average weekly earnings up to $617.32 from $615.33.
More Cuts
“We’re still going to see some months of job cuts,” Brian Bethune, chief financial economist at IHS Global Insight in Lexington, Massachusetts, said before the report. “There is a whole range of options, like adding shifts or hours, that companies can put in place until it becomes necessary to hire people back.”
Workers’ average hourly wages rose 6 cents, or 0.3 percent, to $18.65 from the prior month. Hourly earnings were 2.6 percent higher than August 2008. Economists surveyed by Bloomberg had forecast a 0.1 percent increase from the prior month and a 2.2 percent gain for the 12-month period.
The U.S. recession “is bottoming out” and the economy is poised for “a slow return,” Alcoa Inc. Chief Executive Officer Klaus Kleinfeld said in a Sept. 2 interview. The head of the largest U.S. aluminum producer said government stimulus in the U.S. and China will affect the New York-based company’s earnings “positively” this year.
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
Last Updated: September 4, 2009 08:30 EDT
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