Dismal Picture for U.S. Workers
WASHINGTON, 2 Jul (IPS) -
U.S. companies are shedding workers in numbers not seen for nearly six years, and there seems little hope of a turnaround any time soon.
Firms jettisoned 79,000 workers last month, the biggest job loss since November 2002, leading payroll processor Automatic Data Processing Inc. (ADP) said Wednesday in a widely anticipated monthly report on non-farm employment.
The government was expected to report Thursday that total public and private sector jobs last month posted their sixth decline of the year, but the overall loss was thought likely to be smaller than ADP's figure.
June's 'decrease in employment was broad based across industrial sectors and suggests continued weakness in employment,' said Joel Prakken, chairman of Macroeconomics Advisers LLC, which crunched ADP's payroll data for the report.
Revised data also showed that job gains from April to May were smaller than ADP had previously reported. Rather than hiring 40,000 workers during that month, Wednesday's report said, U.S. firms added only 25,000 jobs.
Goods-producing companies dominated June's bloodletting with 76,000 workers let go -- the sector's nineteenth consecutive month of decline. The manufacturing sector offloaded 44,000 workers for its twenty-second straight month of job losses, ADP said.
Firms that provide services posted their first jobs decline since November 2002, laying off 3,000 workers in a worrying sign for an economy increasingly dependent on the services sector.
The U.S. housing recession, now in its third year, continued to claim livelihoods in the home-building industry and among finance firms specialising in home sales and mortgage lending.
'Today's report suggests no lessening of the recent strain on employment in these industries,' said Prakken.
Builders axed 34,000 jobs in June, ADP found, bringing total terminations to 349,000 since construction jobs peaked in August 2006. Home-finance firms cut 3,000 jobs last month.
More pain is to come. Countrywide Financial Corp. said last week 7,500 jobs would be cut as Bank of America Corp., the second-largest U.S. bank, acquires the troubled mortgage lender.
Officials offered scant hope on Wednesday.
'The U.S. economy is going through a rough period,' Treasury Secretary Henry Paulson said in a speech in London. 'U.S. foreclosures will remain elevated and we should not be surprised at continued reports of falling home prices.'
Mom-and-pop shops and other businesses with fewer than 50 employees provided some cheer, posting a gain of 7,000 jobs in June, ADP said. This compared with losses of 35,000 jobs for companies with 50-499 workers and 51,000 jobs for those with 500 or more employees.
The bad news: This was the small business sector's weakest monthly increase in nearly six years.
Mixed news on Wednesday also came from the government, which in a separate release said orders placed with U.S. factories increased for a third month in May. However, the increase was due to surging oil prices, which kept refineries busy but did nothing to remedy stagnation in orders for equipment and machinery. These are considered a key barometer of capital spending by businesses.
Orders for manufactured goods rose 0.6 percent, following a revised 1.3 percent increase in April, the Commerce Department said. Demand for durable goods -- defined as expensive items made to last at least three years -- was flat in May, however.
Most tellingly, factory orders in May for non-defence capital goods excluding aircraft fell by 0.4 percent, after having risen by 3.1 percent the previous month. Capital goods include machines and other products used in the manufacture of other products. A dip in capital goods orders is an indication that businesses are paring their spending on plant and production capacity.
The Commerce Department further reported a 0.5 percent increase in manufacturers' inventories -- or piles of unsold products -- in May.
The finding -- coupled with the capital goods figure and a similar picture of swelling inventories from the private sector Institute for Supply Management (ISM) Tuesday -- likely will add to concerns that such a buildup will force manufacturers to cut back production, and jobs, in the months ahead.
The national unemployment rate already has climbed a full percentage point, to 5.5 percent, over the past year, according to the Labour Department. The rate likely understates the problem, however, as it excludes people who have given up looking for a job. Also ignored are the underemployed, people involuntarily knocked out of full-time employment and into part-time jobs.
Many economists say the unemployment rate likely will continue to rise well into 2009, topping 6 percent along the way.