Employers kept Americans’ working hours near a record low in August, signaling that economic growth is poised to reward companies with added profits while postponing any recovery in the job market.
The average workweek held at 33.1 hours, six minutes from the 33 hours in June that was the lowest since records began in 1964, the Labor Department said on Saturday. The report also showed that while payrolls fell by the least since August 2008, the unemployment rate rose to a 26-year high of 9.7 per cent.
The preconditions for gains in payrolls, including giving the army of part-timers longer hours and taking on additional temporary employees, weren’t met last month. At the same time, with economic growth forecast to resume this quarter, the figures set the stage for a surge in worker productivity and drop in labor costs that will stoke corporate profits.
“It’s disappointing and it tells us that we are not quite there yet,” said Michael Feroli, an economist at JPMorgan Chase & Co in New York who used to work at the Federal Reserve. “It’s great for business and terrible for households” for coming months, Feroli said.
There were almost 9.1 million Americans working part-time last month who would rather have a full-time job, up 278,000 from July, Saturday’s report showed. It almost matched May’s reading, when it reached the highest level since records began in 1955.
The index of total hours worked, which takes into account changes in payrolls and the workweek, fell 0.3 per cent last month to the lowest level since 2003. “It tells us payrolls aren’t turning positive any time soon,” Joseph LaVorgna, chief US economist at Deutsche Bank Securities Inc in New York, said on a conference call on Saturday, referring to the workweek figures. “This wasn’t a friendly report.”
A measure of unemployment, which includes the part-time workers who would prefer a full-time position and people who want work but have given up looking, reached 16.8 per cent last month, the highest level in data going back to 1994. The workweek for factory employees, which held at 39.8 hours last month, leads total payrolls by about three months, LaVorgna said. Once it reaches at least 41 hours and once payrolls for temporary workers stabilise, then an increase in total employment can be expected months later, he said.
Payrolls for temporary workers started turning down in January 2007, 11 months before the recession began. They dropped by another 6,500 workers in August, the government’s report showed on Saturday.
At the same time, the report did underscore that the economy is on the mend and pulling out of the deepest recession since the 1930s. The drop in payrolls slowed for the sixth time in seven months, to 216,000 in August. Declines in temporary jobs have also slowed in recent months. Companies cut 90,400 temporary staff in November of last year.
It’s a step in the right direction, Tig Gilliam, chief executive officer of Adecco Group North America, said in an interview. “That has to happen first,” he said. “That is a pre-indicator for improvement in the overall market.” Adecco SA, based in Glattbrugg, Switzerland, is the world’s largest supplier of temporary workers.
Gilliam projects the US economy will not start adding jobs until early 2010 and that unemployment will reach at least 10 per cent next year. The jobless rate climbed to 9.7 per cent last month, the highest level since 1983, from 9.4 per cent in July, Saturday’sreport showed.
Total hours worked are down at a 2.8 per cent annual pace so far this quarter, according to calculations by Ian Morris, chief US economist at HSBC Securities USA Inc in New York.
Morris, who projects the economy will expand at a 4 per cent to 6 per cent pace this quarter, says that means worker productivity may exceed the second quarter’s 6.6 per cent jump, which was the biggest gain in almost six years.
“This is set to flow straight into the corporate bottom line,” he said in an e-mail to clients. That indicates the “strong” earnings for companies in the Standard & Poor’s 500 Index in the three months to June will continue this quarter, he said.
