U.S. Workforce Shrinks For 6th Straight Month
Worries About the Economy Deepen

By Michael A. Fletcher
Washington Post Staff Writer
Friday, July 4, 2008

Employers cut 62,000 jobs in June, marking the sixth consecutive month that the nation has shed jobs, according to a government report released yesterday, deepening concern that the struggling U.S. economy could turn worse before it gets better.

The collapse in the real estate and mortgage industries, coupled with the specter of inflation fueled by the rising price of oil and other commodities, has crimped employers and left top policymakers and private analysts convinced that the economy is in for a prolonged period of sluggishness.

"We're not in a traditional recession dynamic where jobs get cut aggressively," said Bruce Kasman, chief economist for J.P. Morgan Chase. Still, he said, "things may be starting to get worse, not better."

Of immediate concern to many economists is how the nation will emerge from the economic slowdown even as it faces inflationary pressures brought on by record-high oil and commodity prices. The price of a barrel of oil pushed near $146 before falling back yesterday, and it has increased about 50 percent since the start of the year.

Wrapping up a European tour, Treasury Secretary Henry M. Paulson Jr. said high oil prices "are a strong headwind, and at this level, they have got a high risk that they are going to prolong the slowdown."

"I don't believe this situation avails itself of quick fixes," Paulson said from London in comments reported by the Associated Press. He noted that, with the global appetite for oil steadily rising and production and refining capacity increasing less quickly, "there are questions in the short term about the ability to meet the demand."

The Department of Labor reported that the economy has lost about 438,000 jobs since the beginning of the year -- a figure that includes revisions for April and May to reflect an additional 52,000 jobs lost in those months. The unemployment rate, which is affected by the number of people seeking work and other factors, was at 5.5 percent, unchanged from a month earlier.

The job losses were led by cuts in construction, financial services and manufacturing. Temporary and other employment agencies also experienced steep job cuts, which some economists saw as further evidence that the bleak employment picture will not improve anytime soon. There were also some cuts in retailing, which combined with the other reductions overwhelmed modest employment increases in leisure and hospitality, health care, mining, and government.

In a separate report, the Labor Department said the number of people applying for unemployment insurance jumped by 16,000, to 404,000, the highest level since late March.

There were 8.5 million unemployed people as of June, up from 7 million a year earlier.

"The economy has entered a slow-motion recession," said Dean Baker, co-director of the Center for Economic and Policy Research. "It is not seeing the dramatic plunges in jobs that characterized prior recessions, but the collapse of the housing bubble is slowly sinking more and more sectors of the economy."

The report said that average hourly wages crept up 0.3 percent from a month earlier, to $18.01, but that tiny bounty has been more than offset by higher food and energy prices. The report also said that 5.4 million Americans -- about 3 percent of the labor force -- were working part time either because their hours had been cut or because they could not find full-time employment, a figure unchanged from May but up 1.1 million from a year earlier.

The jobs news, while sobering, was in line with the expectations of many economists, and the stock market closed yesterday with mixed results. The Dow Jones industrial average -- which was up 0.65 percent yesterday, at 11,288.54 -- is down about 20 percent from its October record, the threshold decline for a bear market.

In a sign that concern about inflation is beginning to take precedence over the tepid economy, the European Central Bank yesterday raised its key lending rate by a quarter of a percentage point, to 4.25 percent. At its most recent meeting, the Federal Reserve halted its series of interest rate cuts, leaving rates stable with a statement that cited the "upside risks of inflation."

In Washington, the two presidential candidates traded comments on the jobs data. Sen. Barack Obama (D-Ill.) said: "Our economy has now shed 438,000 jobs over the past six months, while workers' wages fail to keep pace with the skyrocketing cost of gas, groceries and health care. The American people are paying the price for the failed economic policies of the past eight years, and we can't afford four more years of more of the same."

Sen. John McCain (R-Ariz.) said that the numbers reflect the economic struggles faced by everyday Americans. "To get our economy back on track, we must enact a jobs-first economic plan that supports job creation, provide immediate tax relief for families, enact a plan to help those facing foreclosure, lower health care costs, invest in innovation, move toward strategic energy independence and open more foreign markets to our goods," he said.

The White House released a statement saying that even if employment is declining, the economy has managed to continue expanding -- albeit at an anemic rate. Gross domestic product grew by a 1 percent annual rate during the first three months of this year, and the White House predicted that growth could be stronger in the second quarter.

"We are no doubt in a period of slow growth. It is growth nonetheless, but it's very slow and it's had an impact on employment," said White House Press Secretary Dana Perino.

Congressional Democrats said the jobs reports illustrates the need for more aggressive action by the federal government to prod economic growth by completing work on a pending legislation to bring relief for many homeowners facing foreclosure and by having a second federal tax rebate, to complement the $168 billion plan launched in May.

Sen. Charles E. Schumer (D-N.Y.), chairman of the Joint Economic Committee, asked: "When will the administration realize the economic pain many Americans are suffering, and when will they understand that focused government activities like a housing relief bill and a second stimulus package could help alleviate that pain?"