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Unemployment Rate Hits 5-Year High

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The Associated Press

Published: September 6, 2008

WASHINGTON - The nation's unemployment rate zoomed to a five-year high of 6.1 percent in August as employers slashed 84,000 jobs, dramatic proof of the mounting damage a deeply troubled economy is inflicting on workers and businesses alike.

The Labor Department's report, released Friday, showed the increasing toll the housing, credit and financial crises are taking on the economy.

The jobless rate jumped to 6.1 percent in August, from 5.7 percent in July. And employers cut payrolls for the eighth month in a row. Job losses in June and July turned out to be much deeper. The economy lost a whopping 100,000 jobs in June and another 60,000 in July, according to revised figures. Previously, the government reported job losses at 51,000 in each of those months.

Through August this year, job losses total 605,000.

The latest snapshot was worse than economists were forecasting. They were predicting payrolls would drop by around 75,000 in August and the jobless rate would tick up a notch, to 5.8 percent.

"With the unemployment rate over 6 percent, it is a clear warning sign that this economy is continuing to soften faster than we thought. It is a real concern," said Joel Naroff, president of Naroff Economic Advisors. "Businesses have decided to hunker down. They are not hiring, and they are paring workers where they can. That is making things pretty tough out there."

The White House was disappointed, too.

"There is no question that the labor market is not as strong as we'd like," said press secretary Dana Perino. "We want to see the economy return to job growth, and we understand that this is a difficult time for many Americans. We want everyone who wants to work to be able to find a job."

Wachovia Corp., Ford Motor Co., Tyson Foods and Alcoa were among the companies announcing job cuts in August. GMAC Financial Services this week said it would lay off 5,000 workers.

Job losses in August were widespread, the government report showed.

Factories cut 61,000 jobs, with housing-related manufacturers and automakers among the hardest hit. Construction firms eliminated 8,000 jobs, retailers axed 20,000 slots, professional and business services slashed 53,000 positions, and leisure and hospitality got rid of 4,000. Those losses swamped employment gains in the government, education and health.

Job losses at all private employers - not including the government - came to 101,000 in August.

The government said workers age 25 and older accounted for all the increase in unemployment in August.

All told, the number of unemployed rose to 9.4 million in August, compared with 7.1 million a year ago. Economists predict more job losses ahead, pushing the jobless rate to 7 percent by the fall, according to some projections.

Workers saw wage gains in August, however.

Average hourly earning rose to $18.14 in August, a 0.4 percent increase from July. Economists were forecasting a 0.3 percent gain.

Caught between dueling concerns of slow growth and inflation, the Fed is expected to leave a key interest rate alone at 2 percent when it meets next on Sept. 16 and probably through the rest of this year.

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