US jobs shrink steadily but not precipitously

The 62,000 drop in June ties May's total as the smallest employment drop so far this year.

By , Staff writer of The Christian Science Monitor

America's economy has now been losing jobs for six straight months, but it's a slow erosion rather than a sharp plunge.

Despite mounting economic challenges, from high energy prices to a decline in household wealth, job losses this year remain concentrated in the cyclical industries of construction and manufacturing, as well as in service industries tied to the weak housing market: real estate and financial services.

For the month of June, nationwide employment fell by 62,000 workers, according to a preliminary count released Thursday by the Labor Department.

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The sustained string of job losses since January suggests to many economists that the economy has entered a recession or is on the brink. Yet June's job losses were the smallest so far this year – equal to a revised tally for May and an improvement from the 88,000 lost in March.

In recessions, it's common for monthly job losses to be at more than twice as high as June's. This time the economy appears to be on a shallower slope.

"It's probably going to be this downward glide [of job losses] – nothing really drastic but maybe 50,000 to 100,000 a month," says Brian Bethune, an economist at Global Insight in Lexington, Mass. "What we'd like to see is for the employment market to stabilize" later this year.

Several forces have been helping US workers escape more layoffs.

Congress and the White House acted promptly, as signs of economic trouble mounted, to enact a fiscal-stimulus package. The boost is temporary, but tax rebates have buoyed consumer spending somewhat.

Exports have kept growing, thanks to a strong global economy and the falling value of the dollar. And manufacturing payrolls were already lean before the economy cooled. Factories are employing 350,000 fewer workers than they were a year ago, but so far this is nothing like the dive seen in past recessions.

Another factor: The economy has become increasingly dependent on the service sector as a percentage of all jobs. Service industries tend to be less cyclical in their revenues and hiring.

"You need to have basic services" whether times are hard or easy, says Mr. Bethune. "Transportation services still have to be there. And private healthcare and education services ... are almost immune to the business cycle."

It's even possible that demand for education goes up, he says, as some people choose to hone their skills while jobs are hard to get.

Finally, government payrolls have stayed strong, despite the recent economic headwinds that have begun to affect tax revenues.

"Remarkably, job cuts have not spread as widely as we might expect in this weakening economy," John Challenger, a Chicago outplacement executive, says in a written analysis of employment conditions. "Job cuts in the retail, industrial goods, and consumer product manufacturing sectors have remained fairly level since the economy began its decline last August."

Still, if the economy isn't sinking, it is struggling to stay afloat.

Oil prices closed at record levels above $145 Thursday – a burden on consumers not just in the United States but worldwide.

A slowdown globally could threaten the recent strength in US exports.

And energy costs are having a significant impact domestically, forcing big staff cuts at airlines such as United and Continental.

An index of economic activity in the service sector, also released Thursday, dipped below the neutral level of 50, a possible portent of tougher times ahead.

The index includes an indicator of employment, which fell by five percentage points for the month.

"When you get a drop like that it's not a good sign," Bethune says.

He adds that state governments could be putting themselves in a bind. By keeping employment high now, they may face even tougher choices on how to balance budgets next year. Many states are now running through reserves, in part because falling home prices are affecting property tax revenues.

The Labor Department report included several other important indicators:

•The nation's unemployment rate held steady at 5.5 percent.

•Average hourly earnings rose to $18.01, a 6-cent gain for the month.

•The average work week stayed at 33.7 hours. A decline in overtime, and a shift for many workers into part-time work, has been one way that the employers have adjusted in recent months without resorting to more layoffs.

•Some 5.4 million part-time workers would rather be working full time, up from 4.3 million a year ago.

•More than 18 percent of unemployed workers have been without jobs for at least half a year, another sign of stress in the job market.

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