09/07 08:30
U.S. August Jobless Rate Rises to 4.9%; Payrolls Fall 113,000
By Carlos Torres
Washington, Sept. 7 (Bloomberg) -- The U.S. unemployment rate jumped to a four-year high of 4.9 percent in August as factories dismissed twice as many workers as in the previous month, government figures showed.
The jobless rate rose from 4.5 percent in July, and last month's rate was the highest since September 1997, the Labor Department said. Payrolls fell by 113,000, led by the biggest drop in factory employment since July 1998.
Gateway Inc., which has reported three straight quarterly losses, joined other companies in announcing new rounds of job cuts last week in order to preserve profits as demand slows. Ford Motor Co. is eliminating office workers as well as idling production employees.
``We are only at the beginning of an ongoing process of job losses,'' said Kevin Logan, chief market economist at Dresdner Kleinwort Wasserstein in New York, before the report. The ``attempt by companies to control their costs is not only leading to cuts in payrolls but also less hiring.''
Analysts had expected a jobless rate of 4.6 percent in August and a decrease of 45,000 jobs after July's previously reported loss of 42,000 positions, according to a Bloomberg News survey.
The government's monthly job growth figures are based on statistics provided by businesses, while the unemployment rate is based on a survey of U.S. households.
Fed Expresses Concern
The numbers are likely to increase concern among Federal Reserve policy makers that mounting losses will undermine the economy. ``If more people start losing their jobs, consumer spending might well be reduced,'' said Michael H. Moskow, president of the Fed Bank of Chicago, in a speech last month. ``A rebound in production would be harder to bring about.''
Fed officials have lowered their target for the overnight bank lending rate by 3 percentage points this year in a bid to keep the economy out of recession. Second-quarter growth of 0.2 percent at an annual rate was the slowest in eight years.
Factory employment fell by 141,000 in August, after a 71,0000 decrease a month earlier. Services employment rose, led by hiring at hospitals and other health care providers.
Total employment had risen by 13,000 in July, reflecting revisions, and had fallen by 99,000 in June.
Gateway, the second-largest direct seller of personal computers, said last week that it plans to cut about 5,000 jobs. Of those, 2,600 will be in the U.S.
`Difficult Situation'
Gateway, which has 20,000 workers, said it hopes to save $300 million a year.
``It's been a difficult situation, but I am convinced that these are the right decisions we are making for the long-term success of this company,'' said Ted Waitt, chief executive of Gateway, on a teleconference with analysts last week.
Ford last month said it will eliminate 4,000 to 5,000 salaried jobs, or 11 percent of its U.S. office employees, by the end of the year to save money as sales and market share decline. Three-quarters of the positions will be eliminated through early retirement, which wouldn't directly affect employment figures.
Manufacturing hours dropped to 40.7 in August from 40.9. Overtime rose to 4.2 hours from 4 hours in July. In all industries, hours worked were unchanged at 34.1.
Service-producing employment -- which includes government hiring -- rose by 23,000 after rising by 74,000 a month earlier. Retail employment fell by 26,000 after increasing by 35,000 in July.
Construction employment rose by 5,000 after rising by 9,000 in July.
Earnings Rose
Average hourly earnings rose 0.3 percent, or 4 cents, to $14.38 last month from $14.34. Analysts also expected a 0.3 percent increase in average hourly earnings. Earnings rose 0.2 percent increase in July. Average weekly earnings rose to $490.36 during August from $488.99 in July.
Meantime, the pool of available workers -- 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 -- rose in August to 11.8 million from 10.9 million in July.
The percentage of the U.S. population holding jobs fell to 63.4 percent in August from 63.9 percent in July.
Among blacks, the unemployment rate climbed to 9.1 percent, the highest since July 1998, from 7.9 percent in July. The jobless rate for Hispanics rose to 6.3 percent from 6 percent.
Altered Hiring Plans
For teenagers, unemployment rose to 16.1 percent, the highest since September 1997, from 14.8 percent in July. The jobless rate for women rose to 4.2 percent in August from 3.9 percent. The jobless rate for men rose to 4.4 percent from 3.9 percent.
The slowing economy has also prompted companies to alter their hiring plans. A survey of 16,000 businesses by Manpower Inc. showed that 24 percent plan to hire workers during the October to December period, down from 32 percent a year earlier. ``We see no clear evidence of a trend reversal in hiring in the months ahead,'' said Jeffrey A. Joerres, chief executive of the Milwaukee- based employment firm.
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