- The Washington Times - Friday, July 4, 2008

The economy lost another 62,000 jobs last month in a sign that weakness continues despite a spurt of strength in consumer spending spurred by tax rebates, a Labor Department report showed Thursday.

Businesses have shed a total of 438,000 jobs, mostly in manufacturing, construction, retail and temporary employment, since the job market peaked in December. The unemployment rate was steady last month at 5.5 percent after staging a breathtaking half-point jump in May.

The June job losses reflected deep slumps in housing, credit and autos, and a downshift in consumer spending this year that has been alleviated somewhat in recent weeks by the arrival of more than half of the $105 billion in tax rebates approved by Congress. A few bright spots remain in the job market, particularly health care, education, mining, restaurants and government work, according to the Labor report.

Wage gains have slowed steeply as job growth disappeared, inching ahead by 3.4 percent in the last year - not enough to keep up with an inflation rate running over 4 percent, driven by escalating oil prices.

“This weak labor market report is a reminder of the fundamental weakness of the U.S. economy,” said Harm Bandholz, economist with Unicredit Markets. While rebate-spurred consumer spending and export growth may have kept growth in the economy overall above zero in the first half of the year, they are cloaking a deep stall in the main of engines that drive the U.S. economy, he said.

Other reports out yesterday showed the vast service sector of the economy sank bank into contraction last month after wavering between growth and recession in previous months, while unemployment claims soared at the end of the month. Together with the jobs figures, the reports suggest an economy sliding on the edge of recession but not quite tipping into it.

The employment report is closely watched by analysts looking for signs that the economy is in recession. The substantial decline in jobs and inflation-adjusted wages since December suggests overall economic activity also may have peaked six months ago. But the National Bureau of Economic Research’s business-cycle dating committee, the panel that officially determines whether the U.S. is in recession, has not yet met to decide the issue.

About the only sign of hope in the jobs report yesterday was a smaller loss of 8,000 retail jobs than the 35,000 a month the sector has bled in previous months, probably reflecting the increased buying prompted by the rebate checks, said Stephen Stanley, economist at RBS Greenwich Capital.

The steady loss of jobs in the first half of the year did not reflect spectacular layoffs so much as employers refraining from hiring new workers as they waited to sort out where the economy is headed in the wake of record high energy prices and record drops in house prices.

“The larger question is whether the labor market is poised to take a tumble going forward,” Mr. Stanley said, noting the sharp rise in jobless claims toward the end of June and a “flurry of high-profile layoff announcements.”

“We are not convinced that employment is on the brink of accelerating to the downside, but it certainly does not feel as if things are going to be improving any time soon, and the full impact of the spring spike in energy prices has probably not been felt yet,” he said.

Jacob Hay, spokesman for the Laborers´ International Union of North America, said the loss of another 43,000 construction jobs last month brings the total loss of building jobs to nearly a half million since last year. He called for another round of stimulus spending by Congress, this time focused on repairing decaying highways and bridges and putting construction workers back on the job.

Democratic leaders in Congress have discussed enacting a second package centered in infrastructure spending, but the White House does not support the plan.

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