TOPICS > Economy

Unemployment Hits Nine-Year High

BY Admin  July 3, 2003 at 11:53 AM EDT

The increase surprised many economists and marked the highest percentage of Americans actively looking for work in nine years.

Businesses shed 30,000 jobs just last month, with cuts heavily concentrated on factory assembly lines, the Labor Department also reported Thursday.

“[The unemployment data] is ugly on the surface and uglier when you look inside,” economist Stuart Hoffman of PNC Financial Services Group told Reuters. “You now have declines in private-sector jobs for five straight months. And the hemorrhaging of manufacturing continues, there doesn’t seem to be any abatement.”

The 0.3 percentage point increase in the unemployment rate was the largest month-to-month increase since the Sept. 11, 2001 terror attacks. Economists in a Reuters survey had predicted that the unemployment rate would go up by just 0.1 percentage points in June.

“This was not good, the whole series [of numbers] looks bad,” said James Luke, money manager at BB&T Asset Management Inc. in Raleigh, North Carolina. “The (stock) market is going to take some pause at this … We were looking across the board for better numbers than this.”

One factor behind the rise in the unemployment rate was an increase in the number of people seeking work in June. Optimism about a possible economic rebound led over 600,000 people to resume their job search.

“That suggests a combination of better prospects, getting the war behind us, a better stock market — just more enthusiasm about economic prospects — is causing people to re-enter the labor force,” said Ken Mayland, president of ClearView Economics told the Associated Press, adding that the jobless rate should start to stabilize.

“It would be my bet that we’re at the high-water mark,” he said.

The nation’s factories lost 56,000 jobs last month, making manufacturing the hardest hit sector of the economy. Since July 2000, U.S. factories have cut 2.6 million jobs.

Construction jobs helped offset manufacturing losses last month, with the fourth straight gain in hiring. Construction has added 101,000 jobs since February, reflecting strength in residential building.

The mortgage boom, buoyed by record low interest rates, has been a bright spot in the U.S. economy. The low rates are encouraging people to buy new homes and refinance their old mortgages. The extra cash from refinancing combined with solid home-value appreciation have helped keep consumer spending afloat.

Other hiring gains last month were in health care, leisure and hospitality and temporary employment services.

In a revision that underscored the weakness in the job market, the Labor Department said payrolls fell 70,000 in May instead of the originally reported 17,000 drop.

Across the economy, the length of the average workweek was unchanged at 33.7 hours in June. Factory hours were also steady at 40.2 hours, while overtime remained at 4 hours. Lack of growth in the workweek is not an encouraging sign since companies often increase the hours of their current workers before they begin hiring.

Although most of its news was bleak, the Labor Department Thursday did report a drop in the four-week moving average of unemployment claims. The average number of claims for the period ending June 28 was 425,000, which marked a 4,500 decrease from the previous week. However, the number of new jobless claims in the past week — a more volatile figure than the moving average — rose to 430,000, a seasonally adjusted 21,000 increase from the week before.