News > Economy
Jobless rate up to 6.4%
Climb in jobless rate worse than expected as employers cut another 30,000 jobs.
July 3, 2003: 2:15 PM EDT

NEW YORK (CNN/Money) - U.S. unemployment rose to its worst level in nine years in June as businesses cut thousands of jobs, the government said Thursday.

Unemployment rose to 6.4 percent from 6.1 percent in May, the Labor Department said. That's the highest level since April 1994. It was also worse than the forecasts of economists, who on average expected a jobless rate of 6.2 percent, according to a Reuters poll.

Non-farm payrolls fell by 30,000 jobs, the report said, after losing a revised 70,000 jobs in May. The original May reading had showed only a 17,000 drop in jobs. Economists, on average, had expected no change in June payrolls, according to Reuters.

In a separate report, the number of Americans filing new claims for unemployment benefits rose to 430,000 last week, which also was higher than economists expected.

U.S. stock markets declined Thursday following the report, in what will be a shortened pre-holiday trading day.

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CNNfn's Fred Katayama reports on the unemployment rate rising to 6.4 percent in June from 6.1 percent in May.

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"This report may give pause to some of the optimists looking for a stronger second half," Economic Policy Institute Senior Economist Jared Bernstein told CNNfn's Money Morning. "We need a real boost if we're going to reverse some of these trends that are even more negative than we thought they were."

Other economists also said the report was a disappointment for those looking for signs of an improving economy.

"The report is not quite as bad as it looks, but it's far from good news, with few signs of anything better ahead," said John Hancock Financial Services Chief Economist Bill Cheney. "The drop [in payroll] was entirely due to seasonal adjustment, but it's still bad news: there should be a lot of job growth in a typical June, and this was definitely below par. Regardless of the reasons, there aren't enough jobs."

Part of the increase in the unemployment rate was because the government counted more people as being members of the labor force during the month.

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President Bush's spokesman Ari Fleischer told reporters the president is concerned with rise in unemployment, but that he thought recently enacted tax cuts would help in the future. Fleischer said the numbers show a sign of slow recovery from a short shallow recession.

Labor Secretary Elaine Chao said that while the increase in unemployment was a disappointment, there were signs of strength and future growth in the report.

"I think it's important to take a look behind the numbers," Chao told CNNfn Thursday. "As the economy gains steam and people gain confidence about their job prospects they will declare themselves back in the job market and the unemployment rate may increase. That's I think what we're seeing today."

But Anthony Chan, chief economist of Banc One Investment Advisors, said that the return of people to the job market, while a reason behind the increase in unemployment rate, is not necessarily good news.

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"The good news is that if so many people are entering the labor force it must mean that they are perceiving an improvement in the economy's prospects," Chan said. "The bad news, however, is that if too many people become optimistic about their job prospects, then the unemployment rate will continue to push higher. And the higher unemployment rate does have a damaging impact on consumers. They see it and they think, 'I shouldn't be spending money.' That's one of reason the unemployment rate is so important. It's the one that drives what happens on main street."

However, the government report also showed there were 2.0 million unemployed people who had been looking for work for 27 weeks or longer, an increase of 410,000 over the year. They represented 21.4 percent of the total unemployed, up from 18.8 percent a year earlier. Chan said the percentage of unemployed people who have exhausted unemployment benefits is now near an all-time hire.

"There is a lot of pain, and if anything these statistics are understating the pain," Chan said. "At the same time the economy is showing some potential signs of improvement, you're not finding a lot of firms offering jobs."  Top of page

Reuters contributed to this report

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