The litany of layoffs came home to roost in August as the nation's unemployment rate shot up to 4.9 percent, the highest level since September 1997, the U.S. Labor Department reported today.
But despite its own spate of job cuts last month, Utah managed to dodge the worst of the bloodletting. The state's jobless rate moved down a tenth of a point from July's 3.9 percent to 3.8 percent in August — more than a full percentage point below the national figure, according to figures released today by the Utah Department of Workforce Services.
By comparison, Utah's unemployment rate for 2000 averaged 3.2 percent, well below the 3.9 percent average for the first eight months of this year.
Some 42,900 Utahns were unemployed in August, a 21 percent jump from a year ago.
"But thus far in 2001, Utah's unemployment rate has remained fairly stable," said Ken Jensen, senior economist for the department. "The August figure lengthens that plateau."
Predictably, the U.S. unemployment report hit Wall Street hard, sending stocks lower in all sectors after it was released. The Dow Jones industrial average was down 137 points in late morning trading, the S&P 500 had fallen 10 points to 1,103, and the NASDAQ composite was off 6.40, all three indexes at their lowest points since April 4.
Jensen said Utah's other primary indicator of current labor conditions, the year-over rate of increase in nonfarm jobs, has fallen sharply since January from 2.4 percent to 1.7 percent — the state's slowest job growth since 1987.
But it could be worse.
"We're considerably better off than the national economy, but I don't think we're going to be improving anytime soon," Jensen said. "I think we'll be in the same position next spring as we are now. We're not sure what the Olympics will do for Utah employment, but whatever it does will be temporary."
U.S. unemployment increased 0.4 of a point last month, up from the 4.5 percent level it had sustained since April. Although 4.9 is not particularly high by the standards of past economic downturns — most economists still hesitate to use the word recession to describe the current economy — it is sharply higher than the 3.9 percent rate during much of last year, which was the lowest in three decades.
Many analysts were expecting U.S. unemployment to rise only a tenth of a point to 4.6 percent in August and were surprised by the jump to 4.9. Still, most were putting a positive spin on it, saying they had expected unemployment to hit 5 percent before an expected economic recovery could begin to slow the layoffs.
Jeff Thredgold, president of Thredgold Economic Associates and economic consultant to Zions Bank, said the big jump in August was probably just catch-up from earlier in the year.
"We were puzzled that unemployment had stayed at 4.5 percent to 4.6 percent for the last four or five months, given all the layoffs, so it looks like the rise came all in one month," Thredgold said.
His biggest fear, he said, is that the high national unemployment rate will get saturation coverage by the news media, which could further scare consumers into cutting back spending, which would then delay the recovery in a kind of self-fulfilling prophecy.
The good news, he said, is that today's report likely means the Federal Reserve will go ahead and lower interest rates another quarter point on Oct. 2 and again on Nov. 6. Earlier in the week, further monetary easings by the Fed were thought to be imperiled by a bullish report of the National Association of Purchasing Managers, but Thredgold says the high unemployment rate trumps the NAPM survey.
U.S. businesses cut some 113,000 jobs from the national economy last month, and the trend is continuing in September. Just this week, Motorola laid off 2,000 employees, American International Group cut 1,500 and the merger of Hewlett-Packard and Compaq Computer Corp. is expected to eliminate 15,000 jobs.