U.S. Payroll Losses Slow, Unemployment Rises to 9.7% (Update2)

By Timothy R. Homan
Sept. 4 (Bloomberg) -- The pace of U.S. job losses slowed in August as signs emerged that the recession is ending, while the unemployment rate reached a 26-year high, underscoring threats to consumer spending gains in the recovery.
Employers cut 216,000 from payrolls, fewer than forecast, after a 276,000 drop in July that was larger than previously reported, Labor Department data showed today in Washington. The jobless rate jumped to 9.7 percent from 9.4 percent.
"What we’re learning is that the pace of job declines is subsiding," David Rosenberg, chief economist at Gluskin Sheff & Associates Inc. in Toronto, said in an interview with Bloomberg Radio. "The economy is no longer detonating, but we are still losing jobs, and the unemployment rate is going up. It’s going to be a very tough environment for the consumer."
Rising joblessness underscores Treasury Secretary Timothy Geithner’s judgment that it’s "too early" to start exiting from the unprecedented stimulus measures helping stabilize the economy. AMR Corp. and Whirlpool Corp. are among the companies continuing to cut staff to lower costs and revive profits in the aftermath of the deepest recession since the 1930s.
Stock-index futures fluctuated after the report, and contracts on the Standard & Poor’s 500 Index were little changed at 1,002.30 as of 9:06 a.m. in New York. Treasuries were also little changed, with benchmark 10-year notes yielding 3.35 percent.

Revised Losses

Revisions subtracted 49,000 from payroll figures previously reported for July and June.
The report comes hours before Geithner meets in London with finance ministers and central bankers from the Group of 20 emerging and developed nations.
While the G-20 gathering will discuss how policy makers plan to exit from their fiscal and monetary stimulus efforts, now isn’t the time to start pulling back, Geithner told reporters in Washington this week. "We’ve come a very long way but I think we have to be realistic, we’ve got a long way to go still."
Federal Reserve policy makers waited at least a year after unemployment peaked before raising interest rates in the aftermath of the previous two recessions.

6.9 Million

The latest numbers brought total jobs lost since the recession began in December 2007 to 6.9 million, the biggest decline in any post-World War II economic slump.
Payrolls were forecast to drop 230,000 after a 247,000 decline initially reported for July, according to the median of
79 economists surveyed by Bloomberg News. Estimates ranged from decreases of 365,000 to 100,000. Job losses peaked at 741,000 in January, the most since 1949.
The jobless rate was projected to rise to 9.5 percent.
Forecasts ranged from 9.3 percent to 9.8 percent. Economists surveyed by Bloomberg last month projected the jobless rate will reach 10 percent by early 2010 and average 9.8 percent for all of next year.
Adjusted for part-time employees that would rather have a full-time job and for discouraged workers that are no longer looking for a job but would take one if it were available, the jobless rate jumped to 16.8 percent in August from 16.3 percent.
A rising jobless rate, stagnant wages and falling home values signal a lack of consumer spending may curb an economic recovery.

Factory Jobs

Today’s report showed factory payrolls fell by 63,000 after decreasing 43,000 in the prior month. Economists forecast a drop of 60,000. The decrease included a loss of 15,000 jobs in auto manufacturing and parts industries.
Announcements of staff reductions continued last month.
Whirlpool, the world’s largest appliance maker, said Aug. 28 that it will close its Evansville, Indiana, manufacturing plant, resulting in the elimination of 1,100 jobs, or 1.6 percent of the company’s workforce.
Payrolls at builders declined by 65,000 after decreasing 73,000. Financial firms decreased payrolls by 28,000, after a 17,000 loss the prior month.
Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 80,000 workers after falling 154,000. Retail payrolls decreased by 9,600 after a 43,200 drop.

American Airlines

Fort Worth, Texas-based American Airlines, a unit of AMR, said this week it will furlough 228 flight attendants and put
244 more on involuntary leave as part of the 1,600 job cuts it announced in June.
Government payrolls decreased by 18,000 after falling 28,000 the prior month.
Today’s report also showed the average work week held at
33.1 hours in August. Average weekly hours worked by production workers remained unchanged from the month before, at 39.8 hours, while overtime also held at 2.9 hours. That brought the average weekly earnings up to $617.32 from $615.33.
"We’re still going to see some months of job cuts," Brian Bethune, chief financial economist at IHS Global Insight in Lexington, Massachusetts, said before the report. "There is a whole range of options, like adding shifts or hours, that companies can put in place until it becomes necessary to hire people back."
Workers’ average hourly wages rose 6 cents, or 0.3 percent, to $18.65 from the prior month. Hourly earnings were 2.6 percent higher than August 2008. Economists surveyed by Bloomberg had forecast a 0.1 percent increase from the prior month and a 2.2 percent gain for the 12-month period.
The U.S. recession "is bottoming out" and the economy is poised for "a slow return," Alcoa Inc. Chief Executive Officer Klaus Kleinfeld said in a Sept. 2 interview. The head of the largest U.S. aluminum producer said government stimulus in the U.S. and China will affect the New York-based company’s earnings "positively" this year.