93,000 Jobs lost in August

U.S. Employers Shed 93,000 Jobs in August

By John M. Berry
Washington Post Staff Writer
Friday, September 5, 2003; 1:00 PM

Despite signs the U.S. economy is gathering a strong head of steam, the number of payroll jobs fell by another 93,000 last month, bringing the total job loss since January to almost 600,000, the Labor Department reported today.

"The jobs report is just awful," said Bill Cheney, chief economist at John Hancock Financial Services in Boston. "Businesses across the board are figuring out ways to do more with fewer people. Practically every sector of the economy got rid of jobs in August."

Cheney also voiced a concern shared some analysts that if employment does not begin to increase substantially, the strong economic growth now expected for the rest of this year might begin to wane in 2004.

"If even 5 percent or 6 percent . . . growth isn’t enough to get any net hiring, the risks rise that the stimulus from the tax cuts and defense spending could produce a one-time boost that will fizzle out next year," Cheney said.

As has been the case for most of the past three years, job losses have been concentrated in manufacturing. That sector shed 44,000 jobs last month and a total of more than 2.7 million since mid-2000, according to the department’s monthly survey of about 400,000 businesses.

"This is a lousy employment report as manufacturing has now lost jobs for 37 consecutive months," said Jerry Jasinowski, president of the National Association of Manufacturers. "The armchair experts who say this is just another cyclical downturn are in a dream world completely out of touch with today’s competitive realities. This unprecedented loss of manufacturing jobs is due to structural changes in international trade, rising costs of production in the United States, and the resulting cash flow squeeze that forces job cuts."

Meanwhile, the department said the nation’s jobless rate ticked down to 6.1 percent from 6.2 percent. That rate is based on a separate survey of 60,000 households, which found that total employment rose by 147,000 as the number of unemployed people dipped by 157,000 to 8.9 million.

In a statement to Congress’ Joint Economic Committee, Kathleen P. Utgoff, commissioner of labor statistics, noted, "Some observers have speculated that the household survey provides a better indication of the trend in employment at and around turning points in the business cycle. It is our judgment that the payroll survey provides more reliable information on the current trend in wage and salary employment."

Utgoff said the much larger size of the payroll survey sample, which is benchmarked each year by comprehensive data from federal unemployment insurance returns filed by firms, makes it more reliable.

Since November 2001, the end of that year’s recession, the number of payroll jobs has declined by more than 1.2 million, while employment shown by the household survey has gone up by about 1.4 million. However, a substantial portion of that increase was due to a population adjustment introduced last January, and Utgoff characterized employment shown by the household survey since the recession’s end as "essentially flat."

In a low inflation environment, the "competitive realities" referred to by Jasinowski have forced firms throughout the economy to try to improve their profits by cutting costs — including labor costs — by becoming more efficient rather than by raising prices.

In the second quarter, gains in productivity, the amount of goods and services produced for each hour worked, rose at a 6.8 percent annual rate in the non-farm business portion of the economy. That burst of efficiency came as production rose at a 4.4 percent annual rate, the number of hours worked fell at a 2.3 percent rate and the cost of labor for each unit of production fell at a 2.8 percent rate.

Production is rising even faster this quarter than last, according to many forecasters, while today’s report showed that hours worked fell faster in July and August than they did in the April-June period. That combination points to another huge gain in productivity, several analysts said.

"What we are seeing now is the short-term, dark side of rapid productivity growth," said John Hancock’s Cheney. "Over the longer term, productivity increases are good for the economy. . . . Unfortunately, [it] is bad news for job seekers."

The "good news" is that the productivity gains are giving a strong boost to corporate profits at the same time that workers with jobs are seeing their pay and benefits rising substantially faster than prices. In the second quarter, for instance, their inflation-adjusted compensation rose at a 3.2 percent annual rate, according to Labor Department figures.

According to today’s report, most major industries lost jobs. The only gains were in construction, up 19,000, education and health services, up 24,000, and leisure and hospitality, up 5,000.

As the overall unemployment rate fell by a tenth of a point to 6.1 percent, the jobless rate for adult men also fell a tenth to 5.8 percent while that for adult women was unchanged at 5.2 percent and that for teens fell to 16.6 percent from 18.4 percent. The jobless rate for whites dipped to 5.4 percent from 5.5 percent, that for blacks of African Americans fell to 10.9 percent from 11.1 percent, and for persons of Hispanic or Latino ethnicity declined to 7.8 percent from 8.2 percent.

© 2003 The Washington Post Company

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