GM, Chrysler’s Return Gave Jobs Data a Lift, Economists Say
General Motors Co. and Chrysler Group LLC’s emergence from bankruptcy helped stem U.S. job losses in July and may have exaggerated the improvement in the labor market, economists said.
The reopening of the plants helped boost July auto payrolls by the most since 1998, figures from the Labor Department showed today in Washington. The industry’s workweek also lengthened by the most in almost six years.
“Autos were artificially making things look worse earlier and are now making them look artificially better,” said Michael Feroli, an economist at JPMorgan Chase & Co. in New York. “Excluding autos, we still had an improvement, just not as much.”
Stocks jumped and Treasury securities dropped after the government reported employers cut payrolls in July by the least since August 2008, and the jobless rate dropped for the first time since April of last year. Feroli was among economists that said unemployment will probably keep climbing even after the unexpected drop.
Job losses slowed more than forecast to 247,000 last month from 443,000 in June, today’s report from Labor showed. The median estimate of economists surveyed by Bloomberg News projected a 325,000 drop.
Economists surveyed also anticipated the jobless rate would climb to 9.6 percent from 9.5 percent in June. Instead, it fell to 9.4 percent as discouraged workers left the labor force.
‘Better Than Reality’
The drop “was a welcome break, but a bit better than reality,” said Richard DeKaser, chief economist at Woodley Park Research in Washington and the only economist in the Bloomberg survey to correctly forecast both the payroll and jobless numbers. The report “moves the needle in the direction of a stronger recovery in the second half,” DeKaser said, “but it’s not like all bets are off and we’re back to the races.”
The rate of underemployment — people not actively looking for work and would take a job if available, and those working part time because they can’t find full-time employment — decreased to 16.3 percent in July, the first decline since November 2007. The measure reached 16.5 percent in June, the highest since records began in 1994.
Payrolls at auto and parts makers climbed by 28,000 last month, the biggest jump since August 1998 when most GM workers returned following a strike free credit report and score. The increase last month followed a decline of 45,000 in May and June and helped cut manufacturing job losses to 52,000 from 131,000 the prior month.
Out of Bankruptcy
GM exited bankruptcy July 10, when the former General Motors Corp. sold most of its assets to the new General Motors Co. Chrysler Group was formed with the sale of a majority of its predecessor’s assets June 10 to a group led by Italy’s Fiat SpA.
“Virtually all” of the improvement last month was from the auto industry, said Mark Vitner, senior economist at Wells Fargo Securities in Charlotte, North Carolina. Overall, “it’s going to take a year or more for employment to recover.”
For that reason, Vitner projected total payroll losses this month will be larger than in July.
The average workweek for all workers rose to 33.1 hours, six minutes more than in June and the first gain since August 2008, today’s report showed. The workweek for employees at auto and parts makers jumped 1.6 hours from the prior month, the most since September 2003.
“While it may look good at the beginning, we still have strong, strong concern that the patient is still sick,” Labor Secretary Hilda Solis said today on a conference call with reporters, referring to the job market. “We’ve managed to stop the spiraling downward trend of loss of jobs, but by no way is the administration or myself satisfied.”
Retail Jobs
Other aspects of today’s report also raised warning signs. Retailers slashed 44,100 workers in July, more than double the prior month’s reduction. The firings may signal consumer spending, which accounts for 70 percent of the economy, isn’t gaining speed.
Alan Krueger, the Treasury’s chief economist, pointed to a smaller drop in temporary workers last month than in prior months as a sign the labor market is stabilizing. The number of temporary workers in July fell by 9,800 to 1.74 million, compared with a 31,400 decline a month earlier, Labor’s report showed.