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August Job Picture Bright, Outlook Dim

The unemployment rate fell to a four-year low of 4.9 percent in August, but optimism was darkened by the economic effects of Hurricane Katrina.

WASHINGTON — The economic impact of Hurricane Katrina is casting a pall over the nation’s improved employment situation.

The unemployment rate fell to a four-year low of 4.9 percent in August, as the U.S. added a seasonally adjusted 169,000 jobs, and retailers contributed to the job gains. Apparel and accessories stores added 2,300 jobs in August, to employ a total of 1.4 million, as they prepared for the back-to-school rush. General merchandise stores hired an additional 600 people to employ 2.9 million. However, within this category, department stores, which added 10,300 positions in July, cut their payrolls by 1,300 in August to 1.6 million.

The overall economy supported a total of 134 million jobs, with the unemployment rate dropping from 5 percent in June and July.

Apparel retailers, however, might not enjoy the full benefit of the improving employment picture reported by the Labor Department on Friday, as soaring energy prices consume a great portion of incomes.

“I would expect a lot of people to postpone any nondurable purchases, such as apparel, unless they were absolute necessities,” said Mark Ulmer, executive managing director of micro services at economic forecasting firm Global Insight.

Charles McMillion, president and chief economist at MBG Information Services, said in a statement, “The pattern of job growth remains unprecedented in its dependence on construction and consumer services, with almost no jobs added in industries that face imports or are capable of exporting. The economy cannot be sustained by Americans selling houses, health care, education and haircuts to each other.”

Meanwhile, apparel and textile manufacturers lost more ground, reducing payrolls by 5,900. The impact of Hurricane Katrina on the Gulf Coast likely will be evident in future employment reports. Ulmer said some of the region’s smaller textile and apparel manufacturers might decide to close shop rather than pick up the pieces after the storm, further exasperating the sector’s employment declines.

Slashing payrolls in August were textile mills, down 2,200 to 220,100; textile product mills, off 600 to 176,800, and apparel manufacturers, losing 3,100 to 255,000.

“The only thing that would really help that [decline] is if they get a trade agreement with China,” said Ulmer.

This story first appeared in the September 6, 2005 issue of WWD.  Subscribe Today.

Negotiators from the United States and China broke off a fourth round of talks in Beijing last week, but said they would get together again to try to hammer out a broad deal to regulate Chinese apparel and textile imports, which have surged since global quotas in the sector were abolished Jan. 1.

Domestic producers are pushing for tight restrictions to try to protect their businesses, while retailers desiring cheaper, foreign-made goods want the government to loosen import controls.