Labor report suggests job turnaround

U.S. economy generates first increase in 8 months

Jobless rate holds at 6.1%

Unexpected news brings cautious hope to analysts

October 04, 2003|By Jamie Smith Hopkins | Jamie Smith Hopkins,SUN STAFF

American workers finally got some good news yesterday - 57,000 jobs were added during September, the first break in employment losses since the beginning of the year.

Both economists and investors cheered the long-awaited sign that the labor market mightfinally be turning around, though some analysts cautioned that one month does not mean that the recovery is at last strong enough to consistently generate more jobs.

The additional jobs marked the first increase since January, when companies added 158,000 positions, the Labor Department said, though it was not enough to cut the unemployment rate from its August level of 6.1 percent. About 9 million people remained without jobs.

Still, the report surprised economists, who had expected unemployment to nudge up to 6.2 percent and a loss of 25,000 more jobs. And in another nugget of good news, the Labor Department more than halved the number of jobs it had initially said were lost in August, from 93,000 to 41,000.

"This report offers some glimmers of hope that some of the potential in the economy that's occurring because of ... output growth may finally be resulting in real job creation," said John A. Challenger, chief executive officer of Challenger, Gray & Christmas Inc., an international outplacement firm based in Chicago.

On Wall Street investors responded with a surge of buying, driving the Dow Jones industrial average up nearly 179 points before pulling back. The Dow closed at 9,572.31, up 84.51. The broader market also finished higher. Yesterday's gains followed on the heels of reports this week that manufacturing was expanding and construction spending hit a seven-month high, which helped lift the Dow 194 points Wednesday.

The break in job losses - 336,000 have been cut this year - came as a relief to the White House, which has faced increasing criticism from the bevy of Democratic challengers hoping to unseat President Bush next year.

"Things are getting better," Bush told small-business leaders yesterday in Milwaukee. "But there's still work to do."

Even the loss of manufacturing jobs began to slow last month: 29,000, far fewer than the average 54,000 that had been slashed each month for the previous year.

The service sector was the nation's growth engine last month, adding 74,000 jobs. Employment in professional and business services, for instance, increased by 66,000; half of that gain was in temporary help - typically considered an indicator of more improvement to come.

Dave Mayer, president of Allines Placement Firm in Baltimore, said companies are still reluctant to hire permanently but have requested more temp assistance.

"They have the work, and they have the needs," said Mayer, whose firm often fills positions that turn permanent. "It's a nice way to get your foot in the door."

It has also done wonders for his business.

"Our revenues in the second half of the year are up about 60 percent," he said. "Last year, we placed over 2,000 - this year's going to be probably closer to almost 4,000 people."

Construction gained 14,000 jobs, while government cut 15,000 positions and the leisure and hospitality industry lost 3,000.

The employment report also showed more people were unable to find work after a long search or secure full-time employment. The number of long-term jobless - more than six months - rose to 2.1 million from 1.9 million the month before. Five million people wanted full-time work but had to settle for part-time, compared with 4.4 million in August.

The employment picture in Maryland in August - the most recent month for which data are available from the Labor Department - remained rosier than in all but a handful of other states. Unemployment dropped to 4.2 percent that month from 4.6 percent in July.

Challenger, the outplacement firm CEO, said it was too early to celebrate a U.S. labor market turnaround because companies typically cut 38 percent more jobs in the last four months of the year than the previous four.

"Budgets are coming due ... in other words, they've got to make the numbers somehow," Challenger said. "That puts tremendous pressure on companies at year end."

He also doesn't think people should expect to quickly return to the hiring boom experienced in the 1990s, when 26 million jobs were created. But last month's relatively minor employment growth, "after seven months of severe losses, is certainly some cause for hope," he added.

John E. Silvia, chief economist with Wachovia, based in Charlotte, N.C., believes the economy is undergoing historic changes as a national labor market becomes global, and American firms turn elsewhere for both blue- and white-collar skills.

"This is our first post-NAFTA, WTO recovery, and I think it shows," he said, referring to the 1993 North American Free Trade Agreement and 8-year- old World Trade Organization. "We may have to learn to live with an economy that has below average [job] gains. ... U.S. firms are producing jobs; they are producing manufacturing jobs - only the manufacturing jobs they're producing are in China."

Challenger agrees that the global labor market - along with technology-driven increases in productivity - is affecting U.S. workers. But he believes a global economy will eventually help America as people in developing countries earn the money they need to buy American products.

"That ... is going to create millions of jobs in the U.S.," he said.

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