- The Washington Times - Friday, January 10, 2003

WASHINGTON, Jan. 10 (UPI) — The Labor Department said Friday that in December the nation's employers cut jobs by the largest amount in 10 months as economic growth fizzled and the overall unemployment rate held steady at its highest level since August 1994.

The government agency said the unemployment rate remained at 6 percent as the economy lost 101,000 non-farm jobs during the month after losing a revised 88,000 jobs during November, more than double the government's initial estimate.

Economists on Wall Street were expecting the unemployment rate in December to remain at 6 percent and non-farm payrolls were expected to grow by 20,000 during the month.

Analysts said the report could help generate political support for President George W. Bush's $674-billion tax-cut proposal.

The nation's economy has shown few signs of strength recently — manufacturing activity increased in December, the Institute for Supply Management said — but both the job market and consumer confidence have been weak.

Throughout December, the four-week moving average of initial jobless claims remained above 400,000 — a level associated with shrinking economic activity.

Analysts said the nation's economy needs to create 100,000 to 150,000 jobs a month to reduce joblessness. In the early stages of recovery though, the economy needs to create more than 250,000 jobs per month.

To minimize the risk of further weakness, Bush this week unveiled an economic-stimulus package that experts said would boost economic growth by about a percentage point next year. The Federal Reserve, which cut interest rates a dozen times over the past two years, has said it is not inclined to give the economy more stimulus.

But some economists said the latest employment report may prompt the Fed to revise that stance and open the door to another interest-rate cut. The central bank's policymakers are scheduled to meet again at the end of the month.

The unemployment rate measures the number of unemployed as a percentage of the labor force. Non-farm payroll employment counts the number of paid employees working part-time or full-time in the nation's business and government establishments.

The report also measures the average workweek, which reflects the number of hours worked in the non-farm sector. Average hourly earnings reveal the basic hourly rate for major industries as indicated in non-farm payrolls.

Analysts said if ever there were an economic report that can move the markets, this is it! The anticipation on Wall Street each month is palpable, the reactions are dramatic, and the information for investors is invaluable.

Stocks opened sharply lower Friday, knocked down by a disappointing report on the nation's employment picture during December. The blue-chip Dow Jones industrial average was down 81.70 points to 8,694.40 shortly after the opening bell and the tech-heavy Nasdaq composite index was down 15.40 points to 1,423.06. However, shoat time later, the major indexes were close to Friday’s starting point.

By digging just a little deeper than the headline unemployment rate, investors can take more strategic control of their portfolio and even take advantage of unique investment opportunities that often arise in the days surrounding this report.

The employment data gives the most comprehensive report on how many people are looking for jobs, how many have them, what they're getting paid and how many hours they are working.

These numbers are the best way to gauge the current state and future direction of the economy. They also provide insight on wage trends, and wage inflation is high on the list of enemies for the Federal Reserve.

Fed chairman Alan Greenspan talks about this data frequently and watches for inflation constantly.

By tracking the jobs report, investors can sense the degree of tightness in the job market. If wage inflation threatens, it's a good bet that interest rates will rise, bond and stock prices will fall. No doubt that the only investors in a good mood will be the ones who watched the employment report and adjusted their portfolios to anticipate these events.

The latest report from the Labor Department showed average hourly earnings increased 0.3 percent, or 5 cents, after rising 0.2 percent in November. The average weekly earnings rose to $510.82 from $510.61 in November.

The private workweek shortened to an average 34.1 hours in December from 34.2 hours in November.

The pool of available labor, which combines the number of unemployed job seekers, plus those not looking for work in the last 12 months who said they would take a job — fell to 13 million in December from 13.2 million in November.

The percentage of the U.S. population holding jobs fell to 62.3 percent in December from 62.5 percent in November.

The number of people who have been out of work for six months or longer rose to 1.86 million from 1.1 million in December of 2001.

The government agency said the unemployment rate among blacks rose to 11.5 percent from 11 percent in November. The jobless rate for Hispanics rose to 7.9 percent from 7.8 percent and unemployment rate for whites slipped to 5.1 percent from 5.2 percent.

The report showed the manufacturing industry slashed 65,000 jobs, more than at any time since February. Over the course of 2002, the manufacturing industry cut a total of nearly 600,000 jobs.

The retail industry slashed 104,000 positions during the final month of 2002 after cutting 40,000 jobs during November.

Temporary-help companies, which generate orders from factories, filled 19,0000 positions, after losing 27,000 the month before.

Employment at financial services firms, including investment companies, banks, insurance, and real estate rose 8,000 in December after increasing 7,000 in November.

Service-producing companies, which include retailers, transportation companies and government agencies, lost 42,000 jobs after losing 25,000 jobs a month earlier.

Employment at construction firms rose 3,000 after declining by 4,000 a month earlier. Transportation companies lost 27,000 jobs after losing 9,000 a month earlier and wholesale companies lost 6,000 jobs after losing 14,000 jobs in November.

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