Unemployment rate falls to under 6%

[Shi Huangdi]

http://www.washingtonpost.com/wp-dyn/articles/A39173-2003Feb7.html

The U.S. economy created new jobs in January at the fastest rate in more than two years while the unemployment rate tumbled to a four-month low of 5.7 percent, the government said on Friday in an unexpectedly upbeat jobs report.

Economists welcomed the data as an indication the economy could be shaking off its persistent weakness. But some played down the data, saying the report might have been skewed by statistical anomalies related to the volatile retail job market.

Bond prices fell sharply while the dollar surged against other major currencies. Stock futures prices jumped.

The number of workers on U.S. payrolls outside the farm sector rose 143,000 after a decline of 156,000 in December, according to the Labor Department. It was the biggest increase in payrolls since November 2000, before the 2001 recession.

"I think it is an unwinding of the December decline. Basically, the pattern of those two months was affected by large seasonal swings," said Jade Zelnik of RBS Greenwich Capital in Greenwich, Conn.

"We had lighter-than-normal hiring in the retail sector before Christmas. Now, we have lighter-than-normal layoffs," she added.

The unemployment rate fell three-tenths of a percentage point from December's 6 percent, and hit its lowest level since September.

The increase was more than double the 70,000 jobs U.S. economists in a Reuters survey had forecast. The fall in the jobless rate ran counter to expectations it would remain at the 6 percent mark.

Revisions to the December report, though, made that month's payrolls look a bit weaker -- the department originally said they fell only 101,000.

Despite possible statistical quirks related to the rebound in the retail sector, many economists were pleased to see some glimmers of hope for an economic rebound.

"These numbers are encouraging signs that the labor market has started to stabilize," said Gary Thayer, chief economist at A.G. Edwards & Sons in St. Louis.

"Historically, the unemployment rate peaks about the time that corporate operating earnings start to rise and companies don't feel the same need to cut employment and we're in that situation. So we can hope that the unemployment rate may have peaked," he said.

The U.S. economy suffered a sharp slowdown in the final three months of last year, limping along at an annual rate of just 0.7 percent. Many economists believe that uncertainty caused by the threat of a U.S. war with Iraq is contributing to business reticence about hiring and investing.

But there have been a few hints of improvement lately, with some data series showing manufacturing activity reviving. There were gains in employment in a variety of sectors, though factory jobs fell by 16,000. Retail employment climbed 101,000, recovering from December's drop of 99,000.

Average hourly earnings were flat in January at $14.98 after a 0.3 percent rise in December. Private analysts had forecast a 0.3 percent rise in earnings.

In a healthy sign for the economy, the workweek grew to 34.2 hours from 34.1 hours in the prior month.

Not all recent data has been dismal, but the outlook for the job sector has remained resolutely grim. This has caused some economists to make comparisons with the recovery of the early 1990s, when economic growth returned without solid hiring.

A report released on Tuesday by private outplacement firm, Challenger Gray & Christmas, showed that layoff announcements at U.S. firms surged 42 percent in January over December's levels.

Discount retail giant Kmart , which declared bankruptcy a year ago, announced in January that it plans to slash as many as 37,000 jobs in the coming months, closing more than 300 of its stores.

And this week, Circuit City Stores Inc., the electronics retailer, said it would cut about 2,000 jobs.

Although the economy has been growing since the end of 2001, the recovery has yet to catch hold decisively, chiefly because businesses have yet to start spending and hiring at a healthy rate.

President Bush and his economic team, led by newly minted Treasury Secretary John Snow, are touting a $695 billion package of tax cuts they say will boost growth -- although it still must make it through Congress.

Finally it looks like our economy is turning around....

[DuncanK]

Yay! A lower unemployment rate is always welcome. It will be harder for Bush to **** up the economy now.

[Boris Godunov]

Not so fast:

http://story.news.yahoo.com/news?tmpl=story&u=/nyt/20030205/ts_nyt/u_s__economy_in_worst_hiring_slump_in_20_years

U.S. Economy in Worst Hiring Slump in 20 Years
Wed Feb 5, 3:03 PM ET Add Top Stories - The New York Times to My Yahoo!

By DAVID LEONHARDT The New York Times

The American economy has fallen into its worst hiring slump in almost 20 years, and many business executives say they remain unsure when it will end.


With economic growth having slowed to less than 1 percent in recent months, about one million people appear to have dropped out of the labor force, neither working nor looking for a job, according to government figures.


The surge in discouraged workers is the most significant since the months immediately following the Sept. 11 terrorist attacks, and it suggests that the pain of joblessness is worsening even though the nation's official unemployment rate, which counts only people looking for work, held steady at 6 percent in December.


The lack of jobs has also slowed wage growth, so that only workers in the most affluent group are still gaining ground on inflation, ending a six-year streak of increases in buying power across the board.


"Last year, I heard a lot of people say, `Come back after the first of the year; if the economy picks up, we might hire some people,' " said Tom Koehn, 50, who lost his job in May at a manufacturer of heavy machinery in South Bend, Ind. "But so far, I haven't found anybody who's hiring."


In the last two months of 2002, the employment decline became even worse than it had been at a comparable point in the so-called jobless recovery of the early 1990's, according to recently revised statistics from the Department of Labor. The economy has lost more than two million jobs, a drop of 1.5 percent, since the recent recession began in March 2001, as layoffs have continued despite the resumption of economic growth more than a year ago. The decline was 1.3 percent at the same point in the business cycle a decade ago.


Executives are now saying they have been disappointed too many times already by the halting growth of the past year to begin hiring workers in significant numbers. Although the government is likely to report on Friday that the economy added some jobs in January, many executives are still waiting to be convinced that business has regained a solid footing after the collapse of the late-90's economic bubble.


The possibility of a war in Iraq and an increase in oil prices offers another reason for hesitation, they say. Many companies have also used new technologies and management techniques to produce more with the same number of employees.


"This is what I call the new reality," said Robert M. Dutkowsky, the chief executive of J.D. Edwards, a software maker in Denver that has kept its work force at 5,000 people for the last few years. "The environment we're operating in is what it's going to be like for a while."


In his State of the Union address last week, President Bush (news - web sites) called the improvement of the job market his "first goal" for the coming year and asked Congress to pass a $670 billion, 10-year tax cut.


"We must have an economy that grows fast enough to employ every man and woman who seeks a job," Mr. Bush said. "With unemployment rising, our nation needs more small businesses to open, more companies to invest and expand, more employers to put up the sign that says, `Help Wanted.' "


Most economists say the tax plan and another $4 billion in help for the jobless would have only a small effect on the economy this year.


The number of companies cutting jobs has spiked since November, with AOL Time Warner, Boeing, Dow Jones, Eastman Kodak, Goodyear, J.C. Penney, McDonald's, Merrill Lynch, Sara Lee, and Verizon all announcing new layoffs. Barring a sustained rise in oil prices, however, the cuts appear likely to taper off in the coming months as the economy continues its slow recovery, most forecasters say.


The bigger problem seems to be companies' unwillingness to hire new workers. In December, the number of help-wanted advertisements in newspapers across the country fell to the lowest level in almost 40 years, according to the Conference Board (news - web sites), a research group in New York.


"There isn't the confidence level in business today that we need for growth," said Cinda Hallman, chief executive of the Spherion Corporation, a staffing company based in Fort Lauderdale, Fla., that employs about 400,000 people, down from 600,000 three years ago. "There's uncertainty. Companies are being much more cautious than they used to be."


The labor market began this recession tighter than it had been in 30 years, with the unemployment rate falling below 4 percent in late 2000. Even at 6 percent its level in December, the most recent reading the jobless rate remains lower than it was during the aftermath of most recent recessions.

But companies' reluctance to hire is causing pain in ways that the jobless rate does not measure.

An unusually large number of today's unemployed have been out of work for months, including Mr. Koehn, the South Bend manufacturing worker, who lost his job last spring. Almost 1.9 million people still looking for work have been unemployed for at least six months, triple the number of two years ago.

"There are a lot of people out there who aren't used to asking for help who need some help," said Mr. Koehn, who plans on applying to convenience stores if he has not found other work before his jobless benefits expire in mid-February. "It's a tough pill to swallow when people say, `Oh, you still haven't found work,' and you know you've been looking."

Many other people seem to have stopped looking. Since June, the number of adults not in the labor force has jumped by more than one million, to 72.4 million, according to the Labor Department (news - web sites). Many are retired, still in school or raising children, but the sharp change suggests that a growing number have become too frustrated to continue applying for jobs.

"I went out and pounded the pavement faithfully," said Theresa H. Washington, who lost her $60,000-a-year electrician's job more than a year ago at a Cleveland steel mill closed by the LTV Corporation. "I did the whole nine yards in terms of looking for work, and I never had an interview."

"There is no job market right now," Ms. Washington, 47, added. She estimated that she had applied to more than 50 companies.

In May, she enrolled in a community college and is studying to become a counselor to people addicted to alcohol or drugs, a job that will pay about $40,000 a year. Until she finishes the program in May 2004, she and her two children will rely on extended jobless benefits of about $370 a week, a local health-care clinic, a food bank and help from friends and family, she said.

"It's been a complete change in lifestyle," she said.

The prolonged jobs slump has also taken away much of the bargaining power that workers had in the 1990's.

Qualcomm Inc., the technology company based in San Diego, receives 200 resumés a day, up almost 25 percent from a year ago, and the applicants are generally more qualified than in the past, said Daniel Sullivan, executive vice president for human resources.

At 7-11 stores, employee turnover remains high, but it has fallen in the last year. "One of our biggest challenges was getting people," said James W. Keyes, 7-11's chief executive. Now, he said, "it's much, much easier to both recruit and retain employees."

With little need for companies to compete for workers, wage growth has ground almost to a halt, after inflation takes its bite, for people in the bottom of the income distribution. That is a sharp change from the late 90's, when low unemployment and increases in the minimum wage allowed low-income workers to receive bigger proportional raises than those in the middle.

Workers at the 20th percentile of earners made $8.31 an hour at the end of last year, up only 1.1 percent from a year earlier, according to an analysis of government data by the Economic Policy Institute, a liberal group in Washington. Over the same span, inflation was about 2.2 percent.

The median worker the one falling squarely in the middle of the distribution received a 2.1 percent raise over the same span, to $13.36 an hour. The top third of earners received increases of about 2.7 percent.

In the late 1990's and 2000, workers near the bottom were receiving annual raises of more than 4 percent, slightly better than the increases for those at the median or for most of those near the top.

The economy has shown signs of picking up in recent weeks, including a survey of service-sector managers released today that showed their business picking up in January. But the signs are difficult to distinguish from the hints of recovery that proved false in the last year or so, executives say. Many companies still have more stores and factories than they can profitably use, and little need to add new workers.

The effects of the late-90's bubble in the stock market and business investment will eventually wear off, but the recent increases in corporate efficiency appear to have created a long-term change in the level of economic growth needed for an improving job market. The economy advanced 2.8 percent from the end of 2001 to the end of last year, which was once a growth rate capable of generating demand for tens of thousands of new workers a month. Yet payrolls still declined significantly, as companies used both new technologies and strategies forced on them by an increasingly competitive economy to produce more goods and services with fewer people.

In the last few years, for example, Applebee's, the restaurant chain based in Overland Park, Kan., has centralized its purchasing of food to save costs and begun varying the pay of its workers more than it had been, in order to retain the most productive ones. The steps have allowed its sales to grow faster than its employment, said Lloyd L. Hill, the chief executive.

"It's not brain surgery," Mr. Hill said. "We just recognized we had to do better."

Meanwhile, BASF, the world's largest chemical company, spent $4 billion investing in new plants and equipment in the United States in the last five years. Like many companies, it will turn to its new machines to increase its production before it turns to new workers.

"Now," said Klaus Peter Löbbe, who runs BASF's North American operations, "comes the time to make the assets sweat."

[JohnT]

Dueling articles!

*BANG* "Take that, ya doity rat!"

"Not so fast, copper!"

[SlowwHand]

I know it isn't 6% here.

Manufacturing, damnit.
Services will be the downfall of the country.

[GePap]

The unemployment rate has dropped and gone back up various times during this period: If next months fires stay down or go lower, hats good. If they climb up then this is no more than a temporary blip. And even the "times are better" article is not that positive.

As for the job market: I have a friend that works for Circuit City, and he told me that just this week, they cut 5000 jobs: the interesting things is, they cut the 5000 best performing people! CC used to pay on commission so the managers figured who the highest paid people were (aka the best salespersons) and axed them all. And CC will no longer pay commision. They do plan to pay my friend $18 an hour, which sounds very nice coming from a retail outlet.

[JohnT]

C'mon, Boris, get with the program. Shi's article is datelined February 7th. Yours is dated the 5th. See? Things have changed since then!

[Sten Sture]

Here is a pros first run at the numbers...

Payrolls rose 143K in January, well above the consensus 68K, and
the unemployment rate fell unexpectedly to 5.7% from 6.0%; the
consensus was 6.0%. There was a net downward revision of 48K to
Nov/Dec payrolls, so the overshoot against consensus is only 27K
- but the optics of the headlines certainly look good. The key
numbers are retailing, where the 101K gain reversed Dec's
seasonally afflicted 99K drop, and manufacturing, where the 16K
decline was the smallest since July. There may have been Dec/Jan
seasonal issues there too. But the really big surprise is the drop
in the unemployment rate. There are several major innovations/re
visions in the data in this report, but the BLS says they are
NOT responsible for the drop in the rate. We remain skeptical
pending further data; for now, though, it looks good.


What this guy is saying is that today's release looks good on the surface, but because of the survey revisions, we will have to wait and see.

Clearly the rate of decay in employment has slowed, that much we can say with certainty. Rising employment usually lags economic recovery, so it may be a bit before we get any decent job growth. The numbers in the two surveys are seasonally adjusted so sometimes you get really squirelly results.

[Shi Huangdi]

Originally posted by JohnT
C'mon, Boris, get with the program. Shi's article is datelined February 7th. Yours is dated the 5th. See? Things have changed since then!

Wutang!

[DuncanK]

If consumer spending is still down and empoyers are now hiring we should se economic growth and an even lower inemployment rate in the future.

As far as people leaving the job force, I don't think the economy is that bad right now to see drop in the unemployment rate that is caused by that. It fact, I don't think an overall drop in the unemployment rate has ever been caused by that. I could be wrong though.

edit

[Imran Siddiqui]

Yeah, Duncan.. the restructuring the economy in 2002 might be ending.

[DuncanK]

Hopefully, but we could just be hanging on by a thread.

[boann]

Reprinted from the Feb. 6, 2003, issue of Workers World newspaper


Jobless increase in U.S. and globally
By Heather Cottin

They're cutting 45 workers at the departments of labor and motor vehicles in Connecticut. Not many, you say? But this is in addition to 3,800 other jobs that state's government is eliminating this winter.

"This is the start of the next round of layoffs," an official told reporters.

This is just Connecticut. With all 50 states now facing budget deficits running into the billions of dollars, public-service workers all over the country expect devastating cutbacks.

According to the Census Bureau, 15 million people work for state and local governments, at jobs from teachers to transit workers, administrators to airport workers. Another 11 million people work for the U.S. government.

All these jobs are now in jeopardy.

States are cutting back public-sector jobs because they have less revenue. Over the past 20 years, new tax laws at the state and federal levels have given hundreds of billions of dollars to the wealthiest people and corporations in the United States. Now a capitalist economic crisis has settled in, further cutting tax revenues.

Even as the federal government has cut hundreds of billions of dollars in funds to the states, it has handed over comparable amounts to the military.

Public services are less profitable than the high-tech military-industrial sector of the economy. But because they are more labor intensive, they provide more people with jobs.

When the deindustrialization of the Midwest and other regions began in the 1970s, corporations and politicians promised workers there would be new jobs in the service sector to replace jobs in smokestack industries. Now the service workers--already lower paid--are under attack. Across the nation, services have been privatized or closed down and public workers fired.

Today's unemployment crisis didn't start in the public sector. It has become critical in the private sector as well. In New York City, with an 8.4-percent unemployment rate, holiday sales were a bust. Layoffs by airlines and brokerage firms have accelerated. Almost 175,000 jobs have disappeared from the city over the last two years, including 11,700 in December.

Unemployment plagues other areas as well. The number of workers employed in U.S. manufacturing has declined by 2.4 million since April 1998, according to the Bureau of Labor Statistics.

In capitalism's mad drive for profits, millions of jobs have been eliminated all over the world. The capitalists have closed down industries in the United States, Europe and Japan while expanding their operations in the Third World to exploit cheap labor power. Since the collapse of the socialist bloc, this labor market includes Eastern Europe.

Eliminating higher-paid jobs

Capital is eliminating workers here in research, chip design, engineering, even financial analysis--jobs that have paid well in the United States but that, with the new Internet technology, can be done anywhere.

For example, the Bank of America is slashing over 5,000 jobs. Its spokespeople explain that in India, for example, "work that costs $100 an hour in the U.S. gets done for $20."

The Feb. 3 issue of Business Week magazine, in an article headlined "The New Global Job Shift," calls it "globalization's next wave." It means eliminating higher-paying jobs in the industrialized capitalist countries and moving the work to the Philippines, Hungary, Costa Rica, Bul garia, China, Romania, Russia, the Baltic states and South Africa.

As information technology jobs flow abroad, layoffs decimate the work force here in banking and stock brokerage firms. This includes management-level jobs.

"You will see an explosion of work going overseas," says Forrester Research Inc. analyst John C. McCarthy. He predicts that at least 3.3 million white-collar jobs and $136 billion in wages will shift from the United States, Europe and Japan to low-cost countries by 2015.

The only beneficiary of this trend is the ruling class. Once again, the capitalists are taking advantage of the poverty and insecurity their system creates to rob the working class--even some of its highest-paid members--of their lives and labor.

World unemployment
at record levels

According to a Jan. 24 report issued by the International Labor Organization, unemployment around the world has reached a record figure of 180 million. That is 6.5 percent of the global work force. And, says the ILO, it is likely to continue rising.

The ILO describes the world employment situation as alarming.

Latin America is hardest hit by this capitalist scourge, but in some regions of Africa and the Middle East, 25 percent of young people are unemployed. Even university graduates cannot find work.

The ILO notes that the number of working poor--people earning less than a single measly dollar a day--has risen dramatically, to 550 million people.

In Europe, the economic crisis has driven the average unemployment rate up to 7.6 percent.

The stores are filled with commodities. There is a glut of food. There is industrial overcapacity, plenty of factories, lots of inventory-- in short, capitalist overproduction. But people cannot afford to buy the products of their labor.

What starts a crisis?

A capitalist crisis begins in the area of production, when the owners of capital are driven to expand tempestuously during a period of boom. But at the very peak of the boom, when everyone seems to be working two jobs and borrowing money to buy more on the expectation of even bigger earnings in the future, the crisis begins--usually in the area of capital goods.

The present crisis is now several years old. It began in the area of computers, software, communications, fiber-optic cables, excess commercial building space and other elements of the high-tech economy.

This in turn depressed the market for the materials used in these products. Now the crisis has spread to service workers--both those employed by the state and people in retail sales, food service and similar jobs.

Thus, at a time when science, technology and human industry have created the possibility of decent lives for all workers, a world economic crisis entirely propelled by the irrationality of capitalism creates unemployment and misery for billions.

Acting in the interests of their billionaire cronies, the political establishments in Washington, Bonn, London and Paris keep military spending up to protect their irrational capitalist system by expanding their imperialist control over the rest of the world.

It is an irremediable system, designed to provide profits for one half of 1 percent of the population while the needs, rights and lives of billions of people are ignored.

Globalization is a contradiction in itself, with a potential to unite the working class. The global economy is in contraction, and the capitalists, riding upon the backs of the workers of the world, are heading into another economic crisis. The spurs of the international bourgeoisie and the governments that operate in their interests are digging into the workers' flesh.

Human productive activity can be put on a rational and planned basis so that human need, not profit, is the basis of the economy. But not under capitalism. Capitalism is at present exhibiting its most contradictory and brutal manifestations. Only the working class can intervene to get rid of this insupportable system of capitalist private property.

[Sava]

It's probably the Reagan style job creation. Get rid of higher paying jobs with benefits and replace them with minimum wage paying jobs. It's a good thing the Republicans can protect us from those evil unions. God Bless America.

[DuncanK]

boanne,

Good commie propaganda