Friday, February 1, 2008

Payrolls Drop for First Time Since 2003

Economic news as told by this, as well as my previous, post reveals a dire economic situation that is hurting the middle and lower classes on both sides of the border. Also see earlier post involving an Amy Goodman interview with Economics Journalist Robert Kuttner on the “Most Serious Financial Crisis Since the Great Depression”: “This is the Result of Rightwing Ideology and the Political Power of Wall Street”

-Dra. Valenzuela

Payrolls Drop for First Time Since 2003
By Neil Irwin and Michael Abramowitz
Washington Post Staff Writers
Friday, February 1, 2008; 1:57 PM

The nation shed jobs in January, the government reported today, the first monthly loss since 2003, offering fresh evidence that the labor market is softening and raising the likelihood of a recession this year.

Economists have been counting on steady job growth to keep American households afloat even as their homes become less valuable and the stock market slumps. The loss of 17,000 net jobs in January undermines that expectation. Economists had forecast a gain of 70,000 jobs.

Today's Labor Department report also contained some good news -- the jobless rate edged down to 4.9 percent, from 5 percent, and December job growth was stronger than previously reported. Some economists expect the January job growth number to be revised upward when the department has more complete data. But the labor market has clearly gotten weaker. Average weekly earnings for non-managerial workers fell 0.1 percent in January.

"There's no question the job market is slowing," said Roy Krause, chief executive of Spherion, one of the country's largest recruiting firms, although he said conditions remain fine for those with advanced skills.

In his State of the Union address Monday, President Bush noted proudly that the nation has added jobs for more than four straight years -- a streak that now appears to be over.

Appearing in Kansas City, Mo., today, Bush expressed concern about the new job numbers. "There are certainly some troubling signs, some serious signs, that the economy is weakening, and we have to do something about it," he said after a tour of Hallmark's facilities here.

"The fundamentals are strong," he added. "We're just in a rough patch, as witnessed by the job numbers."

He used the occasion to renew his call for the Senate to complete work on the stimulus package. "The sooner the package makes it to my desk . . . the better off our economy is going to be," he said

Democrats blamed the weak results on Bush. "Today's report that our economy actually lost jobs in January confirms my view that we are sliding into a second Bush recession," said presidential contender Hillary Clinton in a statement. Citing the new numbers, she called for the stimulus package to include an extension of unemployment insurance benefits, which the Bush administration rejects.

The steepest job losses were, as they have been for months, in the construction industry (which shed 27,000 jobs) and manufacturing sector (which lost 28,000 jobs). Construction employers have now cut 141,000 jobs in the past year, reflecting the sharp housing downturn.

The continued job cuts in the manufacturing sector came despite rising exports abroad. Part of the weakness is tied to manufacturers who produce lumber and other goods used in home construction. Ongoing problems in the U.S. auto industry have compounded woes in manufacturing.

Banks and other financial institutions also cut jobs, showing their woes, with a loss of 4,300 jobs in "credit intermediation" and related companies.

Those sources of job losses are nothing new. Before January, a broad range of service industries that had been growing fast enough to more than make up the difference. Now, those service industries are reporting either weak job growth or are shedding positions themselves.

The number of administrative and support jobs fell by 21,500, for example, and the number of state government education jobs was off by 26,000, which could be evidence of lower property tax revenues due to the housing slump. The leisure and hospitality sector, which includes hotels and restaurants, added 19,000 jobs; during the past year, it had added 30,000 jobs a month on average.

The negative job growth could be a false alarm -- the Labor Department initially reported a small loss in August before revising that data upward to a gain when more data was available. But whether the final number turns out to be a gain or a loss, there is compelling evidence of what direction the labor market is heading.

"We are on a downward trajectory," said Carl R. Tannenbaum, an economic consultant in Chicago. "Firms are cutting back in expectation of difficult times."

That would make for a tough year for American consumers. Economists had been counting on continued employment and wage growth to sustain consumer spending. A weaker employment situation, when coupled with the weak housing market, could spell trouble.

"We rely on job creation and the wages that come with it for spending power," said Tannenbaum. "Without job creation and income growth, people will have to consume less."

There was some modestly positive news today about the manufacturing sector. The monthly survey of purchasing managers, which reported that manufacturers were contracting in December, rose to positive territory, barely, in January.

The index by the Institute of Supply Management rose to 50.7, from 48.4. A number above 50 indicates manufacturers are expanding.

The stock market was relatively flat today, as the weak economic news was counteracted by reports that Microsoft made a bid for Yahoo. At 1:33 p.m., the Dow Jones industrial average was up 39 points, or 0.31 percent.

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