Election Section

July jobless rate holds steady

The Associated Press
Saturday August 04, 2001

WASHINGTON — The yearlong slide in factory jobs slowed a bit and service jobs gained some ground in July, holding the nation’s unemployment rate steady at 4.5 percent. 

While the better-than-expected showing in the Labor Department’s report offered a glimmer of hope, analysts said, dangers still remain for the economy, which has been mired in a slowdown for a year. 

“We certainly are not out of the woods yet. The economy is very, very soft, but perhaps one can sense the rate of decline in the economy is slowing,” said Mark Zandi, chief economist for Economy.com.  

“It may be the economy is nearing the end of the worst of its problems.” 

Although payrolls fell for the second month in a row, the drop wasn’t as big: 42,000 jobs were eliminated in July, compared with 93,000 in June. Manufacturing led July’s decline but the loss of factory jobs was the smallest since December. 

“This is the first sign that the hemorrhage of job losses in manufacturing is beginning to ease,” said Jerry Jasinowski, president of the National Association of Manufacturers, whose industry has been bearing the brunt of the slowdown. 

Labor Secretary Elaine Chao said the fact that the jobless rate was unchanged “suggests some stability in the economy.” 

The jobless rate has remained at 4.5 percent for three of the last four months.  


While it represents the highest unemployment level reached during the slowdown, the rate is still low by historical standards. 

However, many economists predict the unemployment rate, which is considered a lagging economic indictor, will rise in the months ahead, possibly passing 5 percent by year’s end. 

“Hiring is not going to get back on track until companies’ sales and profits do,” said Carl Tannenbaum, chief economist with LaSalle Bank/ABN AMRO. “Businesses are anxious for more tangible signs that the bottom has passed and aren’t seeing them yet.” 

To avert the first recession in the United States in 11 years, the Federal Reserve has cut interest rates six times this year, totaling 2.75 percentage points. 

Many analysts believe Fed policy-makers will order another rate reduction, probably by a quarter-point, at their next meeting Aug. 21, and said Friday’s report would justify such a move. 

The Bush administration and many private economists are hopeful that the Fed’s aggressive credit easing along with tax-rebate checks now arriving in mailboxes will permit the country to dodge a recession this year. 

Still, that hope hasn’t erased economists’ biggest fear and the greatest potential threat to the economy: A major pullback in consumer spending, a main force keeping the economy afloat. If the employment climate seriously deteriorates, consumers would probably curtail spending and throw the economy into recession. 

“The economy is still teetering on the edge of a recession. We can handle another few months of moderate job losses, but if it gets much worse, consumer spending ... could sink and take the whole economy down with it,” said Bill Cheney, chief economist at John Hancock Financial Services. 

Manufacturing, which many believe is suffering through a recession of its own, continued its employment slide, losing 49,000 jobs last month. But that was less than half the size of the losses in factory jobs in each of the prior three months, heartening some economists. 

In the last 12 months, manufacturers — coping with slumping demand and excess stocks of unsold goods — have cut a total of 837,000 jobs. 

Meanwhile, employment in the service sector grew by 5,000 in July, the smallest number of jobs added in nearly a year. Much of the weakness came from temporary employment companies, which have lost 429,000 jobs in the last 10 months. 

But employment at health-services firms grew by 25,000 in July, and engineering and management companies added 13,000 jobs. Bars and restaurants gained 40,000. 

Government employment rose by 31,000 last month, with most of the strength coming from state and local governments hiring education workers. 


On the Net: 

Labor Department: http://www.dol.gov