Jobless Rate Rose to 6% in April

Saturday, 03 May 2003 03:28 by: Anonymous
By David Leonhardt
New York Times

Saturday 3 May 2003

The unemployment rate rose to 6 percent last month, from 5.8 percent in March, matching an eight-year high, as the deepest jobs slump in 20 years continued to worsen.

The economy lost 48,000 jobs in April, the Labor Department reported yesterday; in the last three months 525,000 jobs have disappeared. Since 1960, every loss of that magnitude has occurred during a recession.

The report appeared to increase pressure on policy makers trying to lift an economy that has been struggling for almost three years to emerge from the hangover after the 1990's boom. Manufacturers continued to bear the downturn's heaviest burden.

President Bush, speaking yesterday at a military contractor, United Defense Industries, in Santa Clara, Calif., used the increase in the jobless rate to rally support for his tax cut proposal, which many lawmakers consider too expensive.

"That 6 percent should say loud and clear to members of both political parties in the United States Congress we need robust tax relief so our fellow citizens can find a job," he said.

In Washington, Democrats responded that two earlier tax cuts had not cured the economy and that the White House needed a new strategy.

Economists said they still expected the economy to improve in coming months as the winding down of the war in Iraq reduced uncertainty and made businesses and households more willing to spend money. Most analysts predicted that the Federal Reserve would not cut its benchmark interest rate when it meets next week, but they said that the jobs report increased the likelihood of a rate cut.

Stocks rose yesterday, which analysts attributed to relief among investors that the government had not reported larger job losses.

"The best news is that the weakness in the economy does not seem to be intensifying," said Richard D. Rippe, the chief economist at Prudential Securities, noting that job losses had become smaller in each of the last two months. "But we haven't seen any sign of improvement."

Manufacturers cut 95,000 jobs in April, the 33rd consecutive monthly decline. Government agencies, many of them running deficits, surprised analysts by adding 32,000 workers, according to the Labor Department. Outside of government, employment in the service sector remained roughly flat.

Companies also did not take steps that are common shortly before a surge in hiring, like increasing the hours of their existing employees or adding temporary workers.

The number of temporary employees nationwide dropped 14,000, to 2.8 million; it has decreased 20 percent in the last three years.

The average workweek fell to 34 hours last month, from 34.3 hours, tying its lowest level on record. The drop was the sharpest since the blizzard of 1996, although Easter vacations which occurred in April this year and in March last year might have aggravated the decline, economists said.

Companies "have cut so many jobs at this point that some of them can't cut any more, and then they cut hours," said Sharon L. Stark, a managing director at Legg Mason Wood Walker, a brokerage firm. "It's not an encouraging sign."

More than 4.7 million people wanted full-time work last month but could find only part-time work. The number has increased more than 50 percent since 2000 and was at its highest level last month in almost 10 years.

The most recent recession began in early 2001, and growth resumed at the end of that year. But job losses have continued, because growth has been slow enough that companies have been able to expand by becoming more efficient while continuing to lay off employees. In all, the economy has lost more than two million jobs since March 2001.

The calling up of about 220,000 military reservists for the war in Iraq seems to have contributed to the recent job losses, the Labor Department said. Workers called up to active duty are counted as if they had left the labor force, and employment numbers are likely to rise in coming months as they return to work.

But even if the war has exaggerated the recent losses, the job market clearly remains weak, economists said. In a healthy economy, many of the reservists would probably have been replaced by temporary employees.

Labor leaders and some Democrats used yesterday's report to call for an extension of unemployment benefits. The extension passed by Congress and signed by President Bush in January giving many workers 13 weeks of additional benefits after their usual 26 weeks end is set to expire at the end of this month.

Among people still looking for work, the average length of unemployment increased to 19.6 weeks in April, the longest since 1984. About 1.9 million people have been searching for a job for at least six months.

Without a new extension, said Representative Pete Stark of California, the ranking Democrat on the Joint Economic Committee, the benefits would be less generous than they were during downturns in the 1980's and early 1990's. An extension, Mr. Stark said, "will put money directly into the pockets of people who need it."

In place of an extension, Mr. Bush has proposed giving unemployed workers money for training programs, day care or other costs associated of a job search. If they found a job before they had used all the money, they could keep the remainder.

Claire Buchan, a White House spokeswoman, said Mr. Bush was focused on improving the economy, not extending jobless benefits.

"People want jobs; they don't want unemployment checks," Ms. Buchan said.

The jump in the jobless rate last month occurred largely because the number of people looking for work increased, according to the Labor Department's survey of households. When people stop looking for a job, the government does not count them in the jobless rate.

Ms. Stark of Legg Mason said that the increase in job seekers could be viewed as a sign that perceptions of the job market were improving or as evidence that people were desperate for work after months out of the labor force.

The household survey actually shows an increase in jobs over the last three months, but economists give more credence to the much larger survey of businesses. Some of the methodology of the household survey changed this year, possibly causing a jump in its count of both employed and unemployed workers.

Still, the gap between the surveys suggests that the job market might be somewhat better than the payroll survey indicates, even if almost no one considers it healthy.

Among production workers and others who are not supervisors about 80 percent of the work force average weekly pay fell $3.85, to $513.74, last month. Since April 2002, it has risen 2.5 percent, slightly less than the rate of inflation.

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