Unemployment rate holds at 5.9 percent in July
Friday, August 2nd 2002, 12:00 am
By: News On 6
WASHINGTON (AP) _ The nation's unemployment rate held steady at 5.9 percent in July as companies, uncertain about the economic recovery and shaken by accounting scandals, added just 6,000 new jobs.
The Labor Department reported Friday that new hiring in the services industry was tempered by job cuts in construction and manufacturing, leaving July's jobless rate unchanged from the previous month.
Analysts said the report was disappointing because so few new jobs were created, though it was the third straight month of increases. They had predicted 60,000 new jobs for July instead of the 6,000 reported. A revised 66,000 new jobs were added in June, up from the 36,000 previously reported.
``This indicates that we have begun the third quarter on a very slow boat,'' said Sung Won Sohn, an economist with Wells Fargo & Co. in Minneapolis. ``The best we can say is the labor market is in the process of stabilizing.''
In another disappointing report, orders to U.S. factories fell in June for the first time since February, dropping by 2.4 percent, the Commerce Department said. That marked the biggest decline in seven months. Analysts were forecasting a solid 0.5 percent gain.
The weakness was widespread, suggesting that the comeback in manufacturing is slowing. Orders for durable goods, including cars, computers and machinery, went down by 4.1 percent. Orders for nondurables, such as food and clothes, dipped 0.4 percent.
Wall Street drifted lower in early trading, held back by concerns that the economy isn't turning around as quickly as hoped. The Dow Jones industrial average was off 23 points and the Nasdaq fell 9 points.
The number of U.S. jobs has been essentially unchanged during the past five months and the unemployment rate has remained within a narrow 5.8 percent to 6 percent range since April.
In an encouraging sign, long-term unemployment of 15 weeks or longer edged down in July after rising continuously during the previous 13 months.
Overall, the jobs market ``is not as strong as we would like, but it seems stable,'' said Labor Secretary Elaine Chao. ``I think we are still in a recovery, but obviously we'd like this recovery to be stronger.''
Other areas of the economy have been gaining ground after the economic slump, but the jobs market is continuing to sputter. Companies have been worried about the recovery's staying power and a string of corporate scandals, and remain wary of making big commitments in hiring and in capital investment.
``The equity market uncertainties have filtered into business decision making and firms are only cautiously adding workers,'' said Joel Naroff, president and chief economist at Naroff Economic Advisors.
Some economists think the unemployment rate could rise as high as 6.5 percent by the fall before any improvement is realized.
The economy has lost momentum in the spring after bolting out of the starting blocks at the beginning of the year, growing at an annual rate of just 1.1 percent. That was down from a 5 percent rate in the first quarter of this year.
Given the mixed outlook of recent economic indicators, analysts predict the Federal Reserve will leave short-term interest rates alone at its next meeting Aug. 13. Interest rates have been at a 40-year low all year, and most economists think they will stay unchanged through the rest of 2002.
In a third report, the Commerce Department said that consumers _ the economy's lifeblood _ splurged in June, increasing their spending by 0.5 percent. Favorable incentives, such as free-financing offers, along with warm weather enticed shoppers. Consumers had tightened the belt in May, with spending flat.
Americans' incomes, which include wages, interest and government benefits, grew by 0.6 percent in June, the strongest pace in two years. That followed a 0.4 percent advance in May.
The figures were largely in line with analysts' expectations.
Solid income growth, rising homes values and low interest rates have supported consumer spending. Those factors have helped to offset the negative effects of the recent stock market slide, worries about the jobs market and eroding confidence in the economy and corporate leaders.
Economists are hopeful consumers _ whose spending accounts for two-thirds of all economic activity in the United States_ will keep their wallets open in the months ahead, providing a helping hand to the recovery.
In the jobs report, the services industry added 50,000 new positions in July, the fifth straight monthly gain. That was largely because of continued growth in health services. Employment also increased in management and public relations, services to buildings and auto repair and parking.
But those gains were offset by cuts in the construction industry, which lost 30,000 jobs last month.
The manufacturing sector also lost 7,000 jobs in July. The nation's manufacturers were hardest hit by the recession and saw hundreds of thousands of jobs evaporate. Even though the industry is on the comeback trail, it is continuing to shed workers, though at a more moderate pace. July was the fourth consecutive month in which job losses were less than 30,000. Losses averaged 109,000 per month last year.