- The Washington Times - Thursday, July 3, 2003

The unemployment rate shot up to 6.4 percent last month as a surge of 611,000 workers looking for jobs met a drop in positions available, the Labor Department reported yesterday.

As with the nearly 400,000 job losses seen since February, the 30,000 layoffs reported last month were concentrated in manufacturing. A drop of 56,000 factory jobs overwhelmed more-meager employment growth in construction, education, health care, hospitality and a few other areas.

Unemployment is up from 6.1 percent in May, the largest monthly increase since the September 11 attacks. The economy has lost more than 2.5 million jobs since 2001, driving the number of people who have been looking for work more than six months to over 2 million, the most since 1992, according to the department.

For those still working, the report showed that the average yearly wage gain has dropped to 3 percent from over 4 percent during the economic boom of the late 1990s.

Beleaguered job hunters may be experiencing the dark before the dawn, however, as another report out yesterday showed a jump in services-sector activity that suggests the economy is poised for rapid expansion.

“June was a very cruel month for job seekers,” said Joel Naroff of Naroff Economic Advisers, noting that whatever “glimmer of hope” prompted more than a half-million people to start new job searches last month was doused by lengthening unemployment lines.

In a separate report yesterday, Labor said the number of new claims for unemployment benefits jumped by 21,000 to 430,000 last week.

Even the fall-back jobs usually provided by retailers such as restaurants and mall outlets got cut last month by 13,000, Mr. Naroff noted. Some job seekers, though, may have found at least part-time work because of an increase of 30,000 in temporary jobs.

“It is clear that firms are not yet willing to commit to new workers, and until they do, the economy will not be able to rebound sharply,” he said.

The economic drag posed by the poor job market raised questions about the sustainability of this spring’s sharp stock-market advances.

The spurt in unemployment dampened spirits in the market yesterday, though losses were tempered by the more-upbeat news on the services sector. The Dow Jones Industrial Average fell 73 points to 9,070.

The report of booming services-sector activity from the Institute of Supply Management showed strong rises in orders, backlogs and prospects for employment in nearly every service industry.

That “blockbuster” report provides hope that the job market may be hitting bottom, Mr. Naroff said.

“Maybe we are seeing the usual surge in the unemployment rate as the economy turns” and new workers are enticed into the market by better prospects, he said.

Labor Secretary Elaine L. Chao said the return of workers to the labor market is a sign of “renewed confidence in the economy,” in an interview on Bloomberg business news television.

“It’s a great challenge of course: How do we find jobs for these people and how do we help them?” she said. She contended that President Bush’s $350 billion tax-cut package, enacted last month, will help spur growth and jobs.

Democrats, however, say the jump in unemployment is an indictment of Mr. Bush’s policies, however.

House Minority Whip Steny H. Hoyer, Maryland Democrat, said it shows that the more than $1.5 trillion of tax cuts enacted in an effort to spur economic growth and employment since 2001 have failed.

The only concrete result has been a return to record budget deficits, he said.

“This administration’s economic policies have been a disaster,” he said. “As we prepare to celebrate our national day of independence, millions upon millions of our friends, neighbors and relatives continue to face the sleepless nights of unemployment.”

Stock investors who were expecting a better jobs report were taken aback.

“What a horror show,” said Christopher Wolfe, an equity strategist at J.P. Morgan Private Bank. “For those of us who were anticipating some signs of stabilization, this is a disappointment.”

Andrew Stettner, a policy analyst at the National Employment Law Project, said long-term unemployment is the most severe in decades.

“Much attention has been put to scattered signs of economic optimism” in recent weeks, he said. “Today’s astonishing jobless report eliminates such hope. It’s clear that elevated levels of unemployment are the number-one drag on a potential economic recovery.”

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