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Jobless Rate Hits a High, Dims Hope For Recovery
Four-Year Peak Signals Deeper Economic Woes

By Neil Irwin and Alejandro Lazo
Washington Post Staff Writers
Saturday, August 2, 2008

The fallout from the economic downturn spread into new corners of the job market in July, adding to the deep stresses facing American workers.

The unemployment rate jumped yet again as employers slashed jobs for the seventh consecutive month, the Labor Department said yesterday. And the job losses weren't just in the long-troubled construction and manufacturing sectors. Trucking companies, telecommunications firms and car dealers all eliminated thousands of jobs, too, as the troubles in the nation's economy showed new breadth that undermines any hopes of even a tentative recovery in the second half of the year.

The jobless rate rose to 5.7 percent in July, the highest in four years. It is up from 5.5 percent in June and 4.7 percent a year earlier. Employers cut their payrolls by 51,000 net jobs, bringing the total reduction in the nation's job count this year to 463,000. The ranks of the unemployed increased by 285,000 people in the month, continuing a steady deterioration in the job market that began at the end of last year.

"Businesses are looking for ways to cut costs at every turn," said Robert Dye, a senior economist at PNC Financial Services Group. "They're in no mood to hire, and I don't see that turning around anytime soon."

There have been fewer massive layoffs than in the last recession, in 2001. But companies are reducing hours (hours worked dropped 0.4 percent in July), eliminating temporary workers (employment services firms slashed 34,000 jobs in the month), and declining to hire students for summer shifts (the unemployment rate among teenagers was 20.3 percent, up from 15.3 percent in July 2007).

Workers without advanced skills have been hit the hardest. Among people without a high school diploma, the rate has increased to 8.5 percent, from 7.2 percent. The rate among those with a bachelor's degree or more education is 2.4 percent, up only slightly from 2.1 percent a year ago.

"Unfortunately it's the lower income households with the less advanced skills who are getting hit with a weak labor market at the same time they are hit with very high gasoline and food prices," Dye said. "It's a real squeeze."

At Adecco Group North America, a nationwide staffing firm, for example, there are thousands of unfilled positions for engineers and skilled health-care workers, said chief executive Tig Gilliam. On the other hand, in "manufacturing and construction jobs, almost no matter where you are, there's going to be weakness," Gilliam said.

The losses in those sectors are stark. Manufacturers cut 35,000 net jobs in July, and 383,000 in the last year, with some of the worst declines among makers of automobiles and automotive parts. The construction sector continued its steady bleed, losing another 22,000 positions, for a total of 457,000 in the past year.

Residential building has been in steep decline for 18 months, but now commercial construction -- office buildings, retail centers, and the like -- is cutting back, too. Nonresidential specialty trade contractors cut 10,800 jobs in July.

"There is less work, and there is more time between jobs," said Clayton Sinyai, executive director of the Residential Construction Workers Association in Alexandria.

Retailers cut back, too, responding to strapped American consumers, with the fine print showing how Americans' unwillingness or inability to buy large, expensive items is spreading through the economy. Auto dealers cut 8,400 jobs; building materials stores cut 5,500.

High fuel prices walloped trucking companies, leading employment in that sector down by 5,100, and information companies, including publishers and telecom firms, slashed 13,000 jobs. The decline in jobs with employment services was typical for a downturn, said people in that industry. "That's frequently where employers cut first," Gilliam said.

Finance, while not bleeding jobs, is no longer a source of strength. "The accounting and the finance areas, which for years have been really strong, is the area that has definitely been on the decline over the last 12 months," said Paul Villella, chief executive of HireStrategy, an employment services firm in Reston.

The bright spots were few. High oil prices drove new exploration for energy; oil and gas extraction businesses added 10,300 jobs. Government employment rose by 25,000 positions, though many analysts expect that number to come under stress in the months ahead as state and local governments grapple with weaker tax revenue and cut their budgets.

And health care, a stalwart of job creation, continued adding positions, reflecting perennial shortages of qualified labor. Today there are 1,400 job openings in Inova Health System, Northern Virginia's largest nonprofit hospital chain, said Daniel Nichols, the system's director of recruitment.

"While we do have plenty of nursing positions open -- and we're always looking for nurses -- it takes a lot to run a hospital, from mechanics to food service to health care IT," Nichols said.

On the campaign trail, Democratic presidential candidate Barack Obama responded to the gloomy economic news by calling for a fresh round of $1,000 rebate checks to be sent to taxpayers. The $65 billion cost would be covered through a tax on oil companies' windfall profits. Obama also proposed $50 billion in new federal spending.

GOP presidential candidate John McCain, meanwhile, renewed his call for a job-creation plan that includes cutting the corporate income tax.

The Washington area's job market has held up relatively well as the national picture has deteriorated. The region's unemployment rate was 3.9 percent in June, the lowest among large metropolitan areas, and the region added 25,300 jobs in the past year.

Staff writers Kendra Marr and Lori Montgomery contributed to this report.

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