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Job cuts reflect sluggish rebound

A slight improvement in unemployment numbers last month concealed the dismaying fact that businesses cut 93,000 jobs across the nation - the largest loss in five months and a sign that the economy has yet to recover in the way that matters most to workers.

America's unemployment rate dipped to 6.1 percent from 6.2 percent in July, but the ranks of out-of-work people too discouraged to seek new jobs swelled to 503,000, according to U.S. Department of Labor statistics released yesterday.

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"Generally, one would think that a falling unemployment rate is good news. ... This is, in fact, very bad news," said Anirban Basu, head of Optimal Solutions Group, an economic policy and consulting firm in Fells Point. "So many people stopped looking for work."

The nation has shed jobs every month since February - nearly 600,000 in all. Experts say the labor market is usually slower to recover from a recession than other parts of the economy, but they thought it would improve marginally last month instead of taking a turn for the worse.

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"I don't know too many analysts who were expecting anywhere near a drop of the size we got," said Scott Hoyt, senior economist with Economy.com in West Chester, Pa.

He blamed the loss in part on strong productivity gains enabling companies to keep up with demand without adding workers.

"There's certainly incentives for firms to avoid hiring if they can keep their costs down," Hoyt said, pointing to the rising expense of health insurance and other benefits.

Maryland's most recent numbers, for July, countered the national trend: Unemployment ticked up to 4.6 percent, but only because 13,700 people entered the labor force that month, according to the U.S. Department of Labor numbers, which are seasonally adjusted. Unemployment was at 4.3 percent in June.

Basu considered this change more positive than not, especially because the number of people with jobs increased by 5,300.

He said he thinks the discouraged are seeing reason to try again for work, after two months of labor force declines.

"The dynamic in Maryland is much better than it is in the balance of the nation," he said. "Yes, the unemployment rate rose, and the number of unemployed rose as well, but the number of people working who live in Maryland also rose. ... Before people can find jobs, they have to be looking."

The continued gap in the state and national unemployment rate "is testimony to how well the Maryland economy has held up over the past several years," Hoyt said.

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Nationally, job gains and losses by industry last month mirrored recent months. Construction accounted for nearly 20,000 new jobs, fueled by the hot residential market, while health care and social assistance jobs increased by 24,000.

Government employment dropped by 26,000 jobs, affected by fiscal belt-tightening. Manufacturing continued its long slide with a loss of 44,000 jobs.

Basu noted that the manufacturing output is roughly the same as it was four years ago, but firms are managing it with fewer, more productive workers.

Still, strong productivity is a hopeful sign because it's usually followed by job growth, said Richard Clinch, director of economic research for the University of Baltimore's Jacob France Institute.

Companies "want to make sure this is a real recovery, because there's real costs to getting rid of people," Clinch said. "If we have a couple more months of this ... stable economic growth, you're going to start seeing gains in employment."

Layoff announcements are fewer and farther between, another indication of improvement, Hoyt said. The problem, he said, is that businesses are trimming by attrition, letting workers leave without replacing them.

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What happens next depends on a delicate balance of factors, Basu said. General market improvement can lead to improvements in the labor market - unless the number of jobs declines so substantially first that they affect consumer confidence and pull down the economy like a house of cards.

"So it's a race," Basu said. "Which effect will dominate the other?"


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