Jobless Rate Jumps to 5-year High
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WASHINGTON — The nation’s unemployment rate zoomed to a five-year high of 6.1% in August as employers slashed 84,000 jobs, dramatic proof of the mounting damage a deeply troubled economy is inflicting on workers and businesses alike.
The Labor Department’s report, released today, showed the increasing toll the housing, credit and financial crises are taking on the economy.
The report was sure to rattle Wall Street again. All the major stock indexes tumbled into bear territory yesterday as investors lost hope of a late-year recovery. With the employment situation deteriorating, there’s growing worry that consumers will recoil, throwing the economy into a tailspin later this year or early next year.
The jobless rate jumped to 6.1% in August, from 5.7% in July. And, employers cut payrolls for the eighth month in a row. Job losses in June and July turned out to be much deeper. The economy lost a whopping 100,000 jobs in June and another 60,000 in July, according to revised figures. Previously, the government reported job losses at 51,000 in each of those months.
The latest snapshot was worse than economists were forecasting. They were predicting payrolls would drop by around 75,000 in August and the jobless rate to tick up a notch, to 5.8%. The grim news comes as the race for the White House kicks into high gear. The economy’s troubles are Americans’ top worry.
Wachovia Corp., Ford Motor Co., Tyson Foods Inc., and Alcoa Inc. were among the companies announcing job cuts in August. GMAC Financial Services this week said it would lay off 5,000 workers.
Job losses in August were widespread. Factories cut 61,000 jobs, construction firms eliminated 8,000 jobs, retailers axed 20,000 slots, professional and business services slashed 53,000 positions and leisure, and hospitality got rid of 4,000. Those losses swamped employment gains in the government, education and health.
Job losses at all private employers — not including government — came to 101,000 in August.
The government said workers age 25 and older accounted for all the increase in unemployment in August.
Workers saw wage gains in August, however.
Average hourly earning rose to $18.14 in August, a 0.4% increase from July. Economists were forecasting a 0.3% gain. Over the past year, wages have grown 3.6%, but paychecks aren’t stretching as far because of high food and energy prices.
Caught between dueling concerns of slow growth and inflation, the Fed is expected to leave a key interest rate alone at 2% when it meets next on Sept. 16 and probably through the rest of this year. Concerned about inflation, the Fed at its last two meetings didn’t budge the rate. Before that, though, the Fed had aggressively cut rates to shore up the economy.
With the Fed on the sidelines, Senator Obama has called for a second round of government stimulus, while his GOP rival John McCain has favored free-trade and other business measures to spur the economy.