- The Washington Times - Friday, June 6, 2003

Unemployment rose to a nine-year high of 6.1 percent last month as employers bent on cutting costs eliminated an additional 17,000 jobs.

Manufacturers slashed 53,000 positions, bringing the job losses in the industry to 2.6 million in the past two years. Retailers purged 14,000 positions amid sluggish sales, and state, local and federal agencies laid off 25,000 workers in a struggle to balance budgets.

But the job losses were tempered for the first time in months by a revival of business services, health care, education and home construction — which together added another 92,000 jobs — in what many analysts hope is a foreshadowing of broader recovery in the job market.

A major revision of past employment figures by the Labor Department also revealed that a previously reported loss of more than a half-million jobs since February was only half that size, raising hopes that the worst of the jobs downturn is over.

Optimism that a jobs recovery could be emerging spurred gains in the financial markets, with the Dow Jones Industrial Average ending up 21 points, at 9,063, after initially rising as much as 170 points on the report.

“The labor market is stabilizing,” said Lynn Reaser, chief economist with Banc of America Capital Management, although businesses generally have not begun hiring again.

And while the number of unemployed rose to a nine-year high of 9 million, the 130 million people who still hold jobs enjoyed another 3.2 percent gain in their wages in the past year, she noted.

Joel Naroff, president of Naroff Economic Advisers, said the most promising sign in the report was an increase of 78,000 in temporary-help jobs — which in recent years has been a harbinger of growth in the jobs market.

“Firms may be tentatively re-entering the job market,” he said, but added that the tenuous signs of improvement will not satisfy the Federal Reserve, which remains likely to cut interest rates later this month.

Jerry Jasinowski, president of the National Association of Manufacturers, said he sees “the same old dreary tale of two economies” that has prevailed since the recession began two years ago.

“It is the best of times” for sectors such as housing that benefit from low interest rates and sectors such as defense that benefit from security concerns, “but manufacturing continues to hemorrhage jobs,” he said.

Mr. Jasinowski said he expects the recent big drop in the dollar to bolster manufacturing by making U.S. exports more competitive, while the spring’s stock market rally, tax cuts and easier credit conditions should spur a broader economic revival later this year.

Richard Yamarone, economist with Argus Research Corp., said the financial markets are mistaken to see signs of recovery in yesterday’s report, which showed a marked downtrend in hiring that he expects to continue for the rest of the year.

“Businesses cannot spend what they don’t have,” he said. “Anemic economic growth will not be sufficient enough to provide the necessary gains in corporate profitability, which are needed to fuel greater business investment and new hiring.”

Mr. Yamarone noted that economists have been predicting a second-half pickup for the past three years, yet none materialized. Many now seem to be ignoring the dour realities revealed in the report: a jobs recession that has lasted for a record two years and outlasted the much-publicized jobless recovery of the early 1990s.

“No one should be fooled by today’s report. There’s no jobs recovery in sight,” said Jason Dring of the National Employment Law Project. “We’ve passed through nearly half the year and the bad news continues to pile on for workers.”

Not only is unemployment on the rise, but jobless claims are the worst they’ve been since the recession started, and the time it takes unemployed workers to find new jobs is the longest in a decade, he said.

John Silvia, chief economist with Wachovia Securities, said a decade of globalization has permanently changed the job market, forcing businesses to operate more efficiently and greatly increasing the foreign competition faced by American workers.

The dramatic increase in productivity as businesses have slashed costs to meet foreign competition has enabled the economy to grow for more than a year without creating any new jobs, he said.

American workers are experiencing a kind of “revenge of the new economy,” he said, after initially benefiting from the advent of productivity-enhancing technologies during the 1990s economic boom.

Because the economy is globalized, laid-off workers will stay unemployed longer, and many — particularly in manufacturing — may never regain their old jobs and will have retrain themselves to work in other occupations, he said.

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