Massive job losses spur pessimism on recovery

The economy lost another 93,000 jobs last month in nearly every field, from manufacturing to services and government, despite evidence of a strong pickup in growth, the Labor Department reported yesterday.

The news came as a surprise and disappointment to Wall Street investors, Main Street businesses and job hunters who have been counting on this summer’s surge in economic growth to spark a recovery in the long-stagnant job market.

The job losses were widespread, including 67,000 in services and 44,000 in manufacturing. Those losses were partly offset by scattered job gains in industries such as construction, health care and real estate.

Businesses continued to rely on strong gains in the productivity of their existing workers rather than hire new people to accommodate an increase in sales.

Worries that the recurring job losses will eventually undermine consumer confidence and snuff out the economic recovery sent the dollar dropping against most major currencies yesterday, and drove the Dow Jones Industrial Average down 84.56 to 9,503.34. The Nasdaq dropped 10.73 to 1,858.24.

“The blood bath in the labor markets continued,” said Richard Yamarone, economist with Argus Research Corp.

The loss of 1.4 million jobs in the last year and a half is more characteristic of a recession than a recovery, he noted, and is a first for the American economy. Even the “jobless recovery” of the early 1990s started producing jobs after 20 months of growth.

“This is the productivity miracle at work: lost jobs and low inflation,” Mr. Yamarone said.

Low inflation has made consumers so resistant to price increases that businesses have no choice but to cut costs to stay in business and produce profits. And labor — their biggest cost — is what gets cut, he said.

The continuing job losses already have eroded consumer confidence and pose a threat to the “vibrant recovery” that has shown through in other reports in recent weeks, he said.

Joel Naroff, president of Naroff Economic Advisers, said he was taken aback by the jobs report.

“It looks like third-quarter growth could easily exceed 5 percent, but that has yet to make a dent in the labor market,” he said. Productivity growth is so strong, “it may take another couple of strong quarters before any decent job gains appear.”

Economists worry that the temporary boost the economy is getting from tax rebates and tax cuts will not last long enough to jump-start a recovery in the jobs market.

“With interest rates rising, consumer spending is not going to continue soaring without decent job and income gains,” Mr. Naroff said. The report showed incomes barely grew last month as the average workweek flattened out at 33.6 hours, while yearly wage gains slipped to under 3 percent.

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