US jobless rate in June jumps to nine-year high

  • Business
  • Saturday, 05 Jul 2003

WASHINGTON: The US jobless rate surged to a nine-year high in June as employers cut 30,000 workers from their payrolls, the government said in an unexpectedly gloomy report on the economy on the eve of the country’s Independence Day celebrations. 

But a separate measure of the vast services sector showed it grew much more quickly than expected last month, revving up to its fastest pace since September 2000 and offering hope to some that businesses would soon start hiring. 

The jobless rate hit 6.4% last month – a much worse reading than the 6.2% projected by private economists. It was up three-tenths of a percentage point from May’s 6.1% to a level not reached since April 1994, the Labour Department said. 

The employment report “is ugly on the surface and uglier when you look inside”, said economist Stuart Hoffman of PNC Financial Services Group. 

In the past five months, payrolls have tumbled by 400,000. 

However, in a report that offered a glimmer of hope, the Institute for Supply Management (ISM) said its index of non-manufacturing activity surged to 60.6 in June from 54.5 in May. A reading above 50 signals growth in the service sector. 

“The services sector may begin to generate some jobs in the second half of the year. I think we could be seeing better employment numbers down the road,” said Gary Thayer, the chief economist at AG Edwards & Sons in St. Louis. 

Drew Matus, US financial markets economist at Lehman Brothers in New York, was less optimistic. 

“Non-manufacturing ISM shows strength, but is this enough to spark a recovery? Probably not,” he said.  

“We are a lot more concerned about the weakness in the employment report than we are heartened by the strength in this report,” Matus said. 

Economists had expected payrolls to hold steady in June, rather than fall. The government revised May’s payrolls to show a 70,000 drop instead of the earlier reported 17,000 decrease. 

Emphasising the weakness of the job market, the Labour Department said new claims for unemployment benefits rose last week to 430,000 from 409,000 in the prior week. Claims had been expected to rise to only 410,000. 

President George W. Bush, gearing up for the 2004 presidential campaign, came in for some criticism from rivals on the news. Democrats have censured his economic stewardship and say his US$350bil tax cut, signed last month, is skewed to the rich and will do little to help growth. 

More than 2.5 million jobs have vanished since the US economy slid into recession in March 2001. The manufacturing sector, where many of the cuts have occurred, now has the leanest payrolls since 1958. The economy has been growing since early 2002 but very slowly. 

Worried about the lacklustre recovery, the US Federal Reserve last week cut short-term interest rates to 1%, the lowest since 1958. – Reuters  

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