U.S. jobless rate climbs to 5.7%

[ErickMontreal]

U.S. jobless rate climbs to 5.7%

JEANNINE AVERSA

The Associated Press

August 1, 2008 at 12:19 PM EDT

 

WASHINGTON — The U.S. unemployment rate climbed to a four-year high of 5.7 per cent in July as employers cut 51,000 jobs, dashing the hopes of an influx of young people looking for summer work.

 

Payroll cuts weren't as deep as the 72,000 predicted by economists, however. And, job losses for both May and June were smaller than previously reported.

 

July's reductions marked the seventh straight month where employers eliminated jobs. The economy has lost a total of 463,000 jobs so far this year.

 

The latest snapshot, released by the Labour Department on Friday, showed a lack of credit has stunted employers' expansion plans and willingness to hire. Fallout from the housing slump and high energy prices also are weighing on employers.

 

The increase in the unemployment rate to 5.7 per cent, from 5.5 per cent in June, in part came as many young people streamed into the labour market looking for summer jobs. This year, fewer of them were able to find work, the government said. The unemployment rate for teenagers jumped to 20.3 per cent, the highest since late 1992.

 

The economy is the top concern of voters and will figure prominently in their choices for president and other elected officials come November. The faltering labour market is a source of anxiety not only for those looking for work but also for those worried about keeping their jobs during uncertain times.

 

Job losses in July were the heaviest in industries hard hit by the housing, credit and financial debacles. Manufacturers cut 35,000 positions, construction companies got rid of 22,000 and retailers shed 17,000 jobs. Temporary help firms — also viewed as a barometer of demand for future hiring — eliminated 29,000 jobs. Those losses swamped job gains elsewhere, including in the government, education and health care.

 

In May and June combined, the economy lost 98,000 jobs, according to revised figures. That wasn't as bad as the 124,000 reductions previously reported.

 

GM, Chrysler LLC, Wachovia Corp., Cox Enterprises Inc. and Pfizer are among the companies that have announced job cuts in July.

 

GM Friday reported the third-worst quarterly loss in its history in the second quarter as North American vehicle sales plummeted and the company faced expenses due to labour unrest and its massive restructuring plan.

 

On July 15, GM announced a plan to raise $15-billion (U.S.) for its restructuring by laying off thousands of hourly and salaried workers, speeding the closure of truck and SUV plants, suspending its dividend and raising cash through borrowing and the sale of assets.

 

GM also said it would reduce production by another 300,000 vehicles, and that could prompt another wave of blue-collar early retirement and buyout offers.

 

Meanwhile, Bennigan's restaurants owned by privately held Metromedia Restaurant Group, are closing, driving more people to unemployment lines.

 

All told, there were 8.8 million unemployed people in July, up from 7.1 million last year. The jobless rate last July stood at 4.7 per cent.

 

More job cuts are expected in coming months. There's growing concern that many people will pull back on their spending later this year when the bracing effect of the tax rebates fades, dealing a dangerous blow to the fragile economy. These worries are fanning recession fears.

 

Still, workers saw wage gains in July.

 

Average hourly earnings rose to $18.06 in July, a 0.3 per cent increase from the previous month. That matched economists' expectations. Over the past year, wages have grown 3.4 per cent. Paycheques aren't stretching as far because of high food and energy prices.

 

Other reports out Friday showed stresses as companies cope with a sluggish economy.

 

Spending on construction projects around the country dropped 0.4 per cent in June as cutbacks in home building eclipsed gains in commercial construction, the Commerce Department reported.

 

And, manufacturers' business was flat in July. The Institute for Supply Management's reading of activity from the country's producers of cars, airplanes, appliances and other manufactured goods hit 50, down from 50.2 in June. A reading above 50 signals growth.

 

The news forced Wall Street to reassess its initial positive reaction to the jobs data. The Dow, which opened higher, slid about 80 points by midmorning.

 

The Federal Reserve is expected to hold rates steady next week as it tries to grapple with duelling concerns — weak economic activity and inflation.

 

In June, the Fed halted a nearly yearlong rate-cutting campaign to shore up the economy because lower rates would aggravate inflation. On the other hand, boosting rates too soon to fend off inflation could hurt the economy.