The gloomy US Department of Labor (DoL) report – reflecting the third-straight monthly job loss as well as the jobless rate climbing two-tenths of a percentage point from March’s rate of 5.8% to a four-month high (See Unemployment Rate Steady But Payrolls Still Shrinking) – is sure to be a hot topic of conversation at the next meeting of Federal Reserve policymakers next week. Private economists had been braced for a rise in the rate but only to 5.9%.
Prominent in the continuing drumbeat of bad economic news was word that the number of workers on US payrolls fell by 48,000 in April. However, because the April payroll drop was not as severe as had been feared – economists in the regular Reuters poll were forecasting a 53,000 job loss – the report may not prompt Fed Chairman Alan Greenspan and Company to slash interest rates. Still, economists said the Fed could leave the door open for a future cut if the economy does not improve
March Payroll Drop Bigger
Not only did the economy continue to lose jobs in April, but the DoL said the March payroll loss was even worse than first reported: The DoL said it slumped by 124,000, revised from a previously reported 108,000 loss. April’s job weakness was especially pronounced in the factory sector, which lost 95,000 jobs -roughly double the job declines suffered in March and February.
The length of the average workweek decreased sharply to 34 hours in April from 34.3 in March. Average hourly earnings rose 0.1% to $15.11 from $15.09 in March.
The data offered a gloomy snapshot of the economy in the heat of the US war against Iraq but it may yield only limited information on whether growth might be set to rebound now that the US has ended major combat operations in that country. Greenspan predicted such a rebound when he testified before Congress on Wednesday but he also warned the US central bank remained worried about lingering caution among businesses and recent softness in prices, which could make it harder for firms to hire and invest.
Earlier this week, the DoL reported a 13,000-drop in the number of first-time jobless claims to 448,000 from the previous week’s revised figure of 461,000 for the week ending April 26. But there were still several potential danger signals (See Weekly Jobless Report: A Bright Spot Amid Dark Clouds ).
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