Friday, August 7, 2009
The U.S. unemployment rate slid back to 9.4 percent in July, dipping slightly for the first time in 15 months and signaling that the recession may be easing, according to a Labor Department report released Friday.
Employers cut 247,000 nonfarm jobs in July after slashing 443,000 from their payrolls in June. The Labor Department also said 43,000 fewer jobs were lost in May and June than was previously reported.
"It's a much better report than we expected," said David Wyss, chief economist for Standard & Poor's in New York. "It's saying the recession isn't over, but it's calming down."
White House press secretary Robert Gibbs said President Obama still expects unemployment to hit 10 percent this year, adding that it will be "quite some time before we see positive, sustained job growth."
But the jobs report is a sign that Obama's stimulus package is working, Gibbs said. "It is more evidence that we have pulled back from the edge and away from the brink of a depression."
The unemployment report came as a surprise, even to experts. Economists had expected employers to cut 320,000 jobs and the unemployment rate to rise to 9.6 percent.
Wyss said the jobless rate improved, in part, because fewer people were looking for work in July. He attributed that to students giving up on the search for summer jobs.
"If they haven't found something by the Fourth of July, they spend the rest of the summer at the beach," he said.
But despite some signs of encouragement, the report showed there were still problems on the horizon.
Businesses created fewer jobs, and people were staying unemployed longer, Wyss said.
Long-Term Unemployment Grows
The number of Americans who were unemployed for 27 weeks or longer rose by 584,000 to 5 million. In July, one in three unemployed people was out of work for nearly seven months, according to the report.
Gibbs said the White House realizes that unemployment is widespread. "None of us loses sight, though, of the fact that last month a quarter of a million people lost their jobs."
Right now, about 14.5 million people are out of work. The U.S. economy has lost 6.7 million jobs since the recession began in December 2007.
The Labor Department report showed that employment in the manufacturing sector fell by 52,000 in July, with 2 million factory workers losing their jobs since the recession began. Retail employment declined by 44,000, and transportation and warehousing lost 22,000 jobs in July.
Even as the report was being released, Delta Air Lines Inc. announced that it will cut more jobs because of the downturn in the travel industry, but the company did not say how many.
Hours And Pay Climb
Government, health care and education were the bright spots of the report.
Workers' hours nudged up after sinking to a record low in June, and paychecks grew after having fallen or flat lined in some cases.
The deepest job cuts of the recession came in January, when 741,000 jobs disappeared, the most in any month since 1949.
Slower job losses are occurring because companies aren't cutting investment and spending as drastically as they did during the depths of the recession in the final quarter of last year and the first quarter of 2009.
With companies feeling a bit better about the economy's prospects and their own, they boosted workers' hours in July. The average work week rose to 33.1 hours, after having fallen to 33 hours in June, the lowest on records dating to 1964.
Employers also bumped up wages. Average hourly earnings rose to $18.56 in July, up from $18.53 in June. Hourly earnings were stagnant in June. Average weekly earnings, which fell in June, rose to $614.34.
Mixed Economic Signals
The unemployment rate has risen from as low as 4.4 percent two years ago to 9.5 percent in June.
Though initial jobless claims fell 38,000 last week to 550,000 on a seasonally adjusted basis, other July indicators have been less encouraging. Continuing claims for unemployment benefits rose 69,000 to more than 6.3 million. Surveys of corporate purchasing managers showed a slower pace of factory layoffs, but a faster rate of contraction in nonmanufacturing employment.
ADP Employer Services and outplacement firm Challenger, Gray & Christmas found further large losses of private-sector jobs.
Earlier this week, the Obama administration sought to boost the jobs picture with the announcement that $2.4 billion in grants was being awarded to companies and universities involved in the electric vehicle and battery industries.
Obama said the grants — funded by the American Recovery and Reinvestment Act — would create tens of thousands of jobs in 20 states.
Most of the funds were earmarked for projects in Michigan and Indiana, where layoffs in the automotive and recreational vehicle industries have led to skyrocketing unemployment.
The Associated Press contributed to this report.