U.S. jobs lost as economy falters

December saw decline of 101,000

jobless rate sticks at 6 percent

`Economy is going nowhere fast'

January 11, 2003|By Bill Atkinson | Bill Atkinson,SUN STAFF

The nation's unemployment rate remained unchanged at 6 percent in December, but underneath that number was stark evidence that the economy continues to struggle as employers sliced thousands of workers from their payrolls, capping a two-year period in which 1.6 million jobs were lost, according to a Labor Department report released yesterday.

Employers, mainly in manufacturing and retail, slashed payrolls by 101,000 workers last month, the first time in eight months that there were back-to-back declines in the number of jobs. In November, 88,000 jobs were abolished - more than double the Labor Department's initial projections of 40,000.

"The economy is going nowhere fast," said John E. Silvia, chief economist at Wachovia, a Charlotte, N.C.-based banking company. "This is a sideways economy at best. ... There is no momentum."

One of the few bright spots was that the unemployment rate was unchanged. But even that is misleading because it excludes 398,000 jobless people who simply stopped looking for work and therefore are not counted by the government.

They would have added a quarter-percentage point to the jobless rate, economists said.

The number of unemployed workers rose to 8.6 million in December, up 82,000 from November and 381,000 since October. The number unemployed for at least 15 weeks climbed to 3.2 million, up 815,000 over the year.

Hardest hit were retail trade employees, who worked in restaurants, car dealerships and general merchandise stores, where 104,000 jobs were cut.

Manufacturers continued to contract, too, shedding 65,000 jobs in December. The sector lost 592,000 jobs last year and 2.4 million since April 1998.

"This is the revenge of the new economy," Silvia said. "You are able to produce what you need to produce with the existing technology. You don't need to hire."

The increase in job losses caught economists by surprise; many had been expecting modest growth.

"I would have thought the pace of job loss in manufacturing would have narrowed," said Alan D. Levenson, chief economist at T. Rowe Price Associates Inc., the Baltimore mutual fund company. "It didn't. It widened.

"I don't think that we have got the recipe for renewed downward momentum in the labor market; at the same time, there is no denying that this report was weak."

Some sectors of the economy added people, such as help supply services, amusement and recreation services and hotels. Mortgage bankers and brokers, basking in the refinance boom, added 7,000 people in December and 107,000 for the year.

Overall, though, the trend has been weak, with few companies hiring. That means it will take longer for the economy to recover, experts said.

"I have been concerned about this weak recovery for some time," said Charles W. McMillion, chief economist at MBG Information Services in Washington. "To me, it just confirms the fact that the collapse in the bubble economy is really having strong and pervasive effects."

He said business investment has fallen every quarter in the past two years, meaning companies aren't hiring, expanding or buying new equipment.

"I think the economy is very weak," McMillion said.

The stock market barely flinched at the Labor Department's report. The Dow Jones industrial average rose 8.71 points yesterday to close at 8,784.89. The Standard & Poor's 500 stock index was unchanged and closed at 927.57, and the Nasdaq composite rose 9.26 points to 1,447.72.

Despite the gloomy numbers, some economists are optimistic that the economy will have solid growth this year if the country does not become engaged in a prolonged war with Iraq.

Brian Wesbury, chief economist at Griffin Kubik Stephens & Thompson Inc., a Chicago-based investment banking firm, said he is not taking the report as a signal that the economy is getting worse.

"I am not trying to dismiss this number - it was weaker than expected - but it is not necessarily a leading indicator of the economy in 2003," Wesbury said. "The economy can start up well before job growth picks up. My belief is the economy is in better shape than this job number suggests it is."

Wesbury said he expects the nation to grow at about a 3 percent rate in the first half of the year and then pick up steam, perhaps growing as fast as 5 percent.

Low interest rates should help, along with robust housing and auto sales and the Bush administration's $670 billion stimulus package, which calls for an end to taxes on stock dividends and reducing taxes for consumers, he said.

"It is a well-designed plan that will help investment get back on track," Wesbury said.

T. Rowe Price's Levenson said he is hopeful that the recovery will regain momentum:

"I do think that slowly over the course of a year, these job losses are going to turn to employment gains. We will see renewed hiring in the aggregate."

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.