Employers in the U.S. fired workers in July for a seventh straight month and cut hours for remaining staff to a record low, signaling economic growth weakened at the start of the second half of the year.
Americans labored an average 33 hours and 36 minutes per week, six minutes less than in June and matching the shortest workweek since records began in 1964, the Labor Department said yesterday in Washington. The jobless rate jumped to 5.7 percent, the highest level in more than four years.
Combined with the drop in payrolls, the total number of hours worked in July declined by 0.4 percent, indicating the economy took a turn for the worse entering the third quarter. Businesses are broadening efforts to trim labor expenses as surging fuel bills hurt profits.
``Companies have already cut the fat and some muscle, and are now trimming hours,'' said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. The drop in hours ``is going to have a huge impact'' on growth.
Private employers cut 76,000 jobs in July while government hiring increased by 25,000. That brought the decline in total payrolls to 51,000, spanning transportation companies, retailers, manufacturers and temporary help agencies.
In terms of the impact on gross domestic product, every tenth of an hour drop in the workweek is equivalent to a loss of 300,000 to 350,000 jobs, LaVorgna estimated. He cut his third- quarter growth forecast to 0.7 percent at an annual rate, less than half his prior projection of 1.5 percent.
`Case' for Recession
``The decline in hours worked has a suggestion of more job losses to come,'' said John Ryding, chief economist at RDQ Economics LLC in New York. The report ``adds to the case that the U.S. is in recession.''
The economy grew at a 1.9 percent annual pace from April through June, less than economists anticipated, according to figures from the Commerce Department. Revised estimates also showed GDP shrank at the end of 2007. Some economists said this indicated the U.S. slipped into a recession late last year.
One reason for the drop in the workweek may be a jump in part-time employment. The number of Americans having to work fewer hours because they couldn't find full-time jobs as the economy weakened jumped by 308,000 to 5.7 million in July, the most since December 1993. The figure has grown by 1.4 million in the past 12 months, the report showed.
General Motors Corp., the largest U.S. automaker, on July 28 said it'll eliminate shifts at two truck plants and slow output at two others under a plan to build fewer vehicles as U.S. sales decline.
Cost Reduction
``As costs go up, companies are driven to cutting back on the number of hours of work they're paying for, even if they're not cutting the actual number of workers,'' said Stephen Gallagher, chief U.S. economist at Societe Generale in New York. ``I'd look for restraint in output this quarter.''
The average workweek has been drifting down in the last five decades as businesses attempt to increase efficiency, Labor figures show.
With hours already so low, companies may now start firing more workers as demand slows, said David Rosenberg, chief North American economist at Merrill Lynch & Co. in New York.
``Any reduction in demand and order books is going to be met disproportionately by cuts in headcount rather than cuts in hours,'' Rosenberg said in a note to clients.
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