Bad news for all of us
The nation’s jobless rate jumped to 6.4 percent last month as the number of people looking for work but unable to find it surged past the 9 million mark for the first time in 10 years, the Labor Department reported today.
The rate rose from 6.1 percent in May as more than 600,000 people joined the workforce and only about 250,000 got a job, according to the department’s monthly survey of American households. The jobless rate among whites rose only to 5.5 percent from 5.4 percent, but for blacks it increased a full percentage point, to 11.8 percent.
Meanwhile, continuing massive job losses at manufacturing firms contributed to an overall 30,000 drop in payroll jobs last month. Downward revisions in figures for April and May brought to the total decline in payroll jobs to 122,000 in the last three months.
Analysts said the rapid growth in the size of the labor force could be positive sign that individuals believe more jobs are available and that the sluggish economy may be on the verge of a pickup. But Bill Cheney, chief economist for John Hancock Financial Services in Boston, said, “Regardless of the reasons, there aren’t enough jobs. . . . Many more people are now looking for work, perhaps because confidence is recovering, perhaps because it’s summer, or perhaps because their unemployment benefits have run out.”
John E. Silvia, chief economist at Wachovia Bank, noted that while all those payroll jobs were being shed in the second quarter, the economy was expanding at a 1.5 percent to 2 percent annual rate.
“Growth is being achieved through productivity gains and not new hires,” Silvia said. “Therefore, [business] costs are being controlled and profits are up. The new economy did not die with the dot.com bubble. It lives on through productivity gains.”
Gains in productivity, the amount of goods and services produced for each hour worked, are the ultimate source of rising living standards. However, when productivity is increasing significantly, the economy has to grow at a rapid pace before enough jobs are created to accommodate those joining the labor force and to begin to reduce unemployment.
“Can we have economic recovery without new jobs?” wondered Sung Won Sohn of Wells Fargo & Co. “Productivity gains make it possible for a while, but the pattern could not continue indefinitely as productivity increases are already at a high level. Eventually, economic growth could falter if the job market remains weak. . . . Businesses are still shell-shocked from all the events that occurred over the past three years. . . . They want to see sustained rise in demand before hiring people.”
Some analysts have cautioned that an acceleration of economic growth is often accompanied by a spurt of productivity growth. If that happens this year, the jobless rate could stay high for a time, or rise further, even if growth takes off, the analysts said.
Kathleen P. Utgoff, commissioner of labor statistics, said in a statement that manufacturing employment dropped by 56,000 last month, about its average over the past year.
“Nearly all manufacturing industries have been shedding jobs for more than two years, and total factory employment has decline by 2.6 million since its most recent peak in July 2000,” Utgoff said. Job losses also continued in air transportation and telecommunications, which “have lost 123,000 and 202,000 jobs, respectively,” since the 2001 recession began, Utgoff said
In contrast, industries sensitive to the extremely low level of mortgage interest rates, such as construction and mortgage banking, have been adding jobs. Since February, construction employment is up by 101,000 while credit industry jobs have increased by a quarter-million since mid-2000.
