August 3, 2001: 1:35 p.m. ET
July jobless rate unchanged, but manufacturing continues to shed jobs
NEW YORK (CNNfn) - The U.S. unemployment rate held steady in July as employers cut fewer jobs than economists had feared, but Friday's report contained few signs that the economy was recovering from a year-long slowdown.|
The unemployment rate came in at 4.5 percent in July, unchanged from June, while employers cut 42,000 jobs outside the farm sector last month, compared with a revised loss of 93,000 jobs in June, the Labor Department reported.
Separately Friday, the National Association of Purchasing Management (NAPM) said its monthly non-manufacturing index fell to 48.9 in July from 52.1 in June, further evidence of a down economy.
Any reading below 50 suggests activity shrank in the services sector, which includes everything from transportation to legal and financial services. The non-manufacturing index also fell below 50 in May and April.
While the unemployment report was a bit better than expected – analysts had forecast unemployment would rise to 4.6 percent and 50,000 jobs would be lost – it still pointed to overall weakness and means the Federal Reserve remains likely to cut interest rates again later this month.
"It's way too premature to talk about a recovery," Tucker Anthony chief economist Kathleen Camilli said.
"It's not as bad as we thought, but it's still going in the wrong direction," David Orr, chief economist at First Union Corp., told Reuters Friday.
Stock prices fell on Wall Street at midday as the report failed to convince investors of a broader turnaround in the economy.
"What I fear is that these numbers are not telling us everything," Maria Ramirez, international economist with Maria Fiorini Ramirez Inc., told CNNfn's Before Hours Friday. "The worst news on the jobs front is yet to come in the next six months, which I think is still going to give room for the Fed to ease."
The Fed, the nation's central bank, already has cut rates six times this year in a bid to keep consumers spending and ward off a recession.
Still, there were some signs indicating the economy may have hit bottom and is starting to stabilize.
Manufacturing, the hardest hit sector in the recent economic slowdown, shed 49,000 jobs in July, less than half the losses in each month in the second quarter, the department said. The sector has lost 837,000 jobs over the last year.
Labor Secretary Elaine Chao told CNNfn's Market Call Friday that fewer manufacturing losses were a sign the economy is stabilizing.(WAV 368KB) (AIFF 368KB)
"The economy remains weak, but hints of stabilization are emerging," said Bruce Steinberg, chief economist at Merrill Lynch.
Tucker Anthony's Camilli said tax rebate checks, which began arriving in mailboxes this week as part of President Bush's $1.35 trillion tax cut package, should give a boost to spending and demand, and could in turn, bring manufacturing levels higher.
In other sectors, electrical equipment jobs fell by 24,000 while industrial machinery jobs slid 21,000. Construction employment was little changed in July after a June decline. The industry, which has benefited from the robust housing market, has added an average of 11,000 jobs a month so far in 2001.
Service sector jobs were little changed during the month. But 42,000 temporary jobs were lost, representing the 10th consecutive monthly decline for the industry, bringing the total to 429,000 since last September.
The report also showed workers' wages rose 4 cents to $14.35 an hour in July, a 0.3 percent gain that was in line with forecasts. Average hours worked in a week were unchanged at 34.2, seasonally adjusted.
The NAPM non-manufacturing new orders index, seen as a leading indicator of future activity, also tumbled, to 48.6 in July from 53.1, erasing June's gains. In another sign that demand has fallen off sharply, the backlog of orders index fell to its lowest level in five months, to 42.5 from 49.0.
Prices paid by firms fell for the first time since February 1999 as the slowdown eroded pricing power, with the prices index falling to 49.0 in July from 55.5 in June.
Industries reporting the sharpest fall in activity during July included wholesale trade, entertainment, agriculture, insurance and construction. Those industries reporting the strongest growth included finance and banking, health services, real estate and public administration.
from staff and wire reports