20,000 Jobs Lost as in 4th Month of Decline

(From The NewYork Times...)


By PETER S. GOODMAN and MICHAEL M. GRYNBAUM
Published: May 3, 2008

The American economy lost 20,000 jobs in April, the fourth consecutive month of decline, in what many economists took as powerful evidence that the United States is almost certainly now ensnared in a recession.
But the number of jobs reported lost by the Labor Department on Friday was significantly smaller than most analysts had predicted, and the unemployment rate nudged down to 5 percent, raising hopes that the economy may not suffer as severely as once feared.
“It strongly argues that this downturn will be mild and short- lived,” said Mark Zandi, chief economist at Moody’s Economy.com. “As long as businesses hold the line on their layoffs, the economy will weaken, but it won’t unravel.”
On Wall Street, investors bought into that thinking, bidding stocks up sharply in morning trading before pulling back in the afternoon, pushing the Dow Jones industrial average up 0.4 percent for the day, to close at 13,058.40, a new high for 2008.
But economists emphasized that a substantial pullback in consumer spending could yet force American companies to lay off hundreds of thousands of workers in coming months if business prospects do not improve swiftly.
The Federal Reserve increased its direct lending to financial institutions on Friday, in an effort to overcome the banks’ reluctance to lend money.
Despite the comparatively modest number of jobs lost last month, economists found clear signs of widening distress for millions of American workers.
Companies are cutting working hours, even as many avoid layoffs. The number of people working part time because of slack business or because they could not find full-time work swelled to 5.2 million in April from 4.9 million in March. In percentage terms, employees working part time involuntarily were the most since 1995.
The average weekly pay for rank-and-file workers — about 80 percent of the American work force — has risen by a mere 3 percent over the last year, to $602.56. But that increase has failed to keep pace with the rise in the cost of living, driven primarily by the soaring costs of food and energy. In inflation-adjusted terms, these weekly wages have slipped by 1.3 percent since late 2006.
“The punch line is that you don’t have to lose your job to get pinched in a recession,” said Jared Bernstein, senior economist at the labor-oriented Economic Policy Institute in Washington. “Understandably we focus on layoffs and job losses, but most people keep their jobs in a recession. People who held their jobs are losing ground both in terms of hours and hourly wages.”
The number of people on non-farm payrolls was lower in April than six months earlier. Over the last half-century, every time employment has dipped in such fashion, the economy has proved to be either in a recession or just emerging from one.
A private research organization, the National Bureau of Economic Research, determines whether a downturn qualifies as a recession, which it defines as a “significant decline in economic activity spread across the economy, lasting more than a few months.”
Several economists predicted the organization would eventually conclude that the nation entered a recession late last year or early this year, though the Commerce Department has reported overall economic activity has remained slightly positive.
“It’s kind of tough when you’ve got to tell your family that a lot of things are going to change and the things we’re used to are basically going to stop,” said Howard Dempsey, a worker at a Freightliner truck factory in Cleveland, N.C., who recently learned that he would lose his job next month, along with 1,500 other people — nearly half the work force.
“It’s hard to understand how all this happened so fast, when one day we’re building 200 trucks a day and the next day we’re down to 100,” he said.
Mr. Dempsey has worked at the plant for almost a decade and is paid $22.30 an hour, plus health insurance and other benefits. Those wages allowed him to buy a house, and plan for college for his two teenage daughters, both well-accustomed to shopping as a pastime.
“Now it’s going to be window- shopping,” Mr. Dempsey said. “We’ve got to rethink college and see how we’re going to pay for that.”
The layoffs at the Freightliner plant illustrate how troubles that began in real estate have filtered through the economy. As commerce has slowed in recent months, so has growth in over-the-road shipping, and so have orders for trucks.
“Tragically, there’s no indication from our primary customers that there’s going to be a change in their demand in the foreseeable future,” said Chris Patterson, president and chief executive of Daimler Trucks North America, which owns the Freightliner plant.
With oil prices above $115 a barrel, any business connected to fuel consumption is increasingly vulnerable. This week, in Central Point, Ore., Erickson Air-Crane, which makes helicopters for commercial use, laid off 35 production and support workers, with wages ranging from $12.75 to $38.19 an hour.
Over all, 46,000 manufacturing workers were laid off last month, and 326,000 such positions have been lost over the last year, the Labor Department reported. Construction remained the focus of contraction, losing 61,000 jobs. Retailers eliminated 26,800 jobs.
Health care continued to be a rare bright spot, adding nearly 37,000 jobs. Restaurants and bars added 18,000 jobs. Professional and business services, which includes accountants, architects and management consultants, added 39,000 jobs.
The unemployment rate, a source of some reassurance, is a flawed gauge: It is based on a survey of households and includes self-employed people, but it does not count people who have given up looking for work. These so-called discouraged workers swelled to 412,000 in April from 399,000 a year earlier.
In total, the household survey offered a counterpoint to the rest of the report, finding a net increase of 362,000 people employed in April.
Economists cautioned that the household survey is notoriously volatile from month to month. Over the last year, it has shown significant declines in those working. The relatively small number of job losses in April may support a theory that the current downturn will bring relatively few layoffs because hiring in recent years has been weak, leaving many companies lean.
“Companies are finding ways to cut their costs other than cutting lots of workers,” said Ed McKelvey, a senior economist at Goldman Sachs.
In Columbus, Neb., orders at Behlen Manufacturing Company for its pre-engineered metal buildings have slowed. So far, the company, which employs 1,100 people, has avoided layoffs, Tony Raimondo, the chairman, said.
Behlen plans to build up inventory and perhaps shift workers into busier areas, like building grain silos, while waiting for better days, he said. But if trends continue, about 50 workers would be vulnerable.
“We’re on the bubble,” Mr. Raimondo said. “The odds are against us that we will get through the summer without layoffs.”