Employers Cut Jobs For Sixth Straight Month
ROBERT SIEGEL, host:
From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.
MICHELE NORRIS, host:
And I'm Michele Norris, and we begin this hour with the latest unemployment numbers. The U.S. economy lost 62,000 jobs in June, according to new numbers out today. The unemployment rate remained the same, at 5.5 percent. June was the sixth straight month with job losses, and that has never happened before without the economy falling into recession. As NPR's Chris Arnold reports, many employers are feeling squeezed.
CHRIS ARNOLD: High fuel prices and the ongoing fallout in the housing and credit markets are costing the U.S. jobs. The biggest hits continue to be in construction and manufacturing.
Mr. JAMIE McGREGOR (Morgal Machine Tool Company): We're fighting battles on various levels just to survive.
ARNOLD: Jamie McGregor is a manager in his family's business, the Morgal Machine Tool Company. It's in Springfield, Ohio, and it makes metal machinery parts.
Mr. McGREGOR: We make parts that go into treadmills and bicycles for the exercise industry. We make parts that go into locomotive engines.
ARNOLD: Like many businesses, McGregor's is getting hit with rising costs. It's not just oil; global demand for all kinds of commodities like steel and copper has sent prices through the roof.
Mr. McGREGOR: The price of steel has virtually doubled in the last six months. You know, the cost of health care and making that affordable is becoming increasingly difficult.
ARNOLD: And that's pushing the company to trim costs elsewhere. The weak dollar has actually helped McGregor to win some business away from European competitors, but the company still has had to cut its temporary workers, and it's eliminated about 20 of its 400 full-time jobs through attrition.
Many other businesses are doing the same. Nariman Behravesh is chief economist with Global Insight.
Mr. NARIMAN BEHRAVESH (Chief Economist, Global Insight): The economy's struggling. It's lost 438,000 jobs in the last six months. We are, for all intents and purposes, in a recession, most likely a mild recession.
ARNOLD: He says mild in part because the job-loss numbers haven't been really extreme so far. In recessions historically, we've seen double the number of monthly job losses that we're seeing right now, but there are still reasons to be concerned. Take inflation. Right now McGregor says his company is going to have to raise the price of its machine parts.
Mr. McGREGOR: If we sell a stamped part for a dollar and 70 cents of it is comprised in steel, and the cost of steel doubles, you know, we've got $1.40 in raw material in the part, and our customers are resisting to take any increase.
ARNOLD: So McGregor says his company actually loses money on some parts that it sells, and it needs to renegotiate contracts that pass along that cost. If that were easy for businesses to do, inflation could spiral out of control, not good for the economy. But Behravesh says...
Mr. BEHRAVESH: So far it hasn't happened yet, and to me the sort of quintessential example of this is the airline industry. Jet fuel prices have probably quadrupled since 2000.
ARNOLD: But Behravesh says competition stops airlines from passing along anywhere near that full cost. That, of course, leaves many companies in a real bind, and there are some economists who see big trouble here. Peter Morici is a professor at the University of Maryland.
Professor PETER MORICI (University of Maryland): The U.S. economy is in crisis. We are not going through an ordinary recession. Rather, we're losing jobs that will never come back again.
ARNOLD: Morici doesn't see high energy prices going away, and he thinks the credit crisis will drag on. But Nariman Behravesh says we shouldn't get too freaked out here.
Mr. BEHRAVESH: One of the most remarkable things about the U.S. economy is its resilience, and when you think about it, it's been hit by two shocks simultaneously, the housing and credit crunch, if you will, and separately the oil shock. and the fact that we're only in a mild recession I think is a testament to the resilience of this economy.
ARNOLD: So Behravesh says he's optimistic about the long term, but for now even he predicts continued job losses. He sees unemployment rising to six percent or higher by the end of the year. Chris Arnold, NPR News.