August 1, 2008
Jobless Rate Rises to Four-Year High of 5.7 Percent
By The Pittsburgh Tribune-Review
Aug. 1--WASHINGTON -- The nation's unemployment rate climbed to a four-year high of 5.7 percent in July as employers cut 51,000 jobs, dashing the hopes of an influx of young people looking for summer work.
Payroll cuts weren't as deep as the 72,000 predicted by economists, however. And, job losses for both May and June were smaller than previously reported.
July's reductions marked the seventh straight month where employers eliminated jobs. The economy has lost a total of 463,00 jobs so far this year.
The latest snapshot, released by the Labor Department today, showed a lack of credit has stunted employers' expansion plans and willingness to hire. Fallout from the housing slump and high energy prices also are weighing on employers.
The increase in the unemployment rate to 5.7 percent, from 5.5 percent in June, in part came as many young people streamed into the labor market looking for summer jobs. This year, fewer of them were able to find work, the government said. The unemployment rate for teenagers jumped to 20.3 percent, the highest since late 1992.
Wall Street initially found reason for optimism in the report, but news that General Motors Corp. had a $15.5 billion loss in the second quarter weighed on investors. Shares were mixed in early trading.
The economy is the top concern of voters and will figure prominently in their choices for president and other elected officials come November. The faltering labor market is a source of anxiety not only for those looking for work but also for those worried about keeping their jobs during uncertain times.
Job losses in July were the heaviest in industries hard hit by the housing, credit and financial debacles. Manufacturers cut 35,000 positions, construction companies got rid of 22,000 and retailers shed 17,000 jobs. Temporary help firms -- also viewed as a barometer of demand for future hiring -- eliminated 29,000 jobs. Those losses swamped job gains elsewhere, including in the government, education and health care.
In May and June combined, the economy lost 98,000 jobs, according to revised figures. That wasn't as bad as the 124,000 reductions previously reported.
GM, Chrysler LLC, Wachovia Corp., Cox Enterprises Inc. and Pfizer are among the companies that have announced job cuts in July.
GM Friday reported the third-worst quarterly loss in its history in the second quarter as North American vehicle sales plummeted and the company faced expenses due to labor unrest and its massive restructuring plan.
On July 15, GM announced a plan to raise $15 billion for its restructuring by laying off thousands of hourly and salaried workers, speeding the closure of truck and SUV plants, suspending its dividend and raising cash through borrowing and the sale of assets.
GM also said it would reduce production by another 300,000 vehicles, and that could prompt another wave of blue-collar early retirement and buyout offers.
Meanwhile. Bennigan's restaurants owned by privately held Metromedia Restaurant Group, are closing, driving more people to unemployment lines.
All told, there were 8.8 million unemployed people in July, up from 7.1 million last year. The jobless rate last July stood at 4.7 percent.
More job cuts are expected in coming months. There's growing concern that many people will pull back on their spending later this year when the bracing effect of the tax rebates fades, dealing a dangerous blow to the fragile economy. These worries are fanning recession fears.
Still, workers saw wage gains in July.
Average hourly earnings rose to $18.06 in July, a 0.3 percent increase from the previous month. That matched economists' expectations. Over the past year, wages have grown 3.4 percent. Paychecks aren't stretching as far because of high food and energy prices.
The Federal Reserve is expected to hold rates steady next week as it tries to grapple with dueling concerns -- weak economic activity and inflation.
In June, the Fed halted a nearly yearlong rate-cutting campaign to shore up the economy because lower rates would aggravate inflation. On the other hand, boosting rates too soon to fend off inflation could hurt the economy.
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