Job losses slow, but is it from government hiring?

McClatchy NewspapersMay 8, 2009 

WASHINGTON — Friday's better-than-expected employment report from the Labor Department gave another sign that the U.S. economy may be bottoming out, but the jump in the unemployment rate is a reminder for millions of Americans that the outlook for jobs will remain bleak for some time.

The pace of job losses eased in April, with employers shedding 539,000 jobs, bringing the total jobs lost since the recession began in December 2007 to more than 5.7 million. April's employment numbers were better than expected by most mainstream economic forecasters, who'd projected upward of 620,000 lost jobs.

Even as those numbers were seen as trending positive, they were offset by the uptick of the unemployment rate to 8.9 percent, the highest level since 1983, from 8.5 percent in March.

"The job market is bad, but as bad as expected, and headed in the right direction. Monthly job losses averaged 700,000 in the first quarter and appear on track to lose (an average of) 500,000 in the second quarter," said Mark Zandi, the chief economist for forecaster Moody's Economy.com. "There will be another 2.5 million in job losses and unemployment will peak at 10 percent by this time next year."

April's net job loss total actually was somewhat misleading: Private-sector employment actually fell by 611,000 jobs, but government hiring, which added 66,000 jobs, mostly for the upcoming census, offset some of them.

Although April's job numbers reflect a welcome slowing of the downturn, a deeper look suggests that it will be a long, hard climb back to full employment. The number of long-term unemployed — those out of work for 27 weeks or longer — continues to rise alarmingly.

Some 498,000 more Americans moved into the ranks of the long-term unemployed in April, the Bureau of Labor Statistics reported, bringing the total to 3.7 million. Of that large pool, some 2.4 million joined those ranks since the recession began in December 2007.

"It really points to the nation's economic challenge, this big idled work force and most people have been out of work for a very long time," said Andrew Stettner, the deputy director of the National Employment Law Project, an advocacy group that promotes expanded unemployment benefits. "It means they really haven't been able to find anything. For many people it's a mismatch between skills and (available) jobs. It's going to take a really major approach to get these workers back to work."

The long-term jobless now are more than 27 percent of all the unemployed, the highest ever since records began in 1948, Stettner said.

In response, President Barack Obama announced a plan Friday to help the unemployed enter college for retraining without losing unemployment benefits, which usually happens when they enter school. This plan will depend on state participation. Obama said he also wants colleges to consider using their federal Pell Grants to help unemployed workers retool for the new economy.

"The idea here is to fundamentally change our approach to unemployment in this country, so that it's no longer just a time to look for a new job, but to prepare yourself for a better job," Obama said, adding that a new Web site, www.opportunity.gov, would be a resource for the unemployed to find out what options are available to them.

Obama tapped the vice president's wife, Jill Biden, a longtime community college teacher who has a doctorate in education, to lead a national publicity campaign about community colleges. The president also said he was asking every American to commit to at least one year of higher education or job training. "Every American will need to get more than a high-school diploma," he said.

Obama said that those without college degrees are now more than twice as likely as degree-holders to be unemployed, and that "so many of the Americans who have lost their jobs can't find new ones because they simply don't have the skills and training they need for the jobs they want."

Unstated but implied in the Obama initiative is the fact that the U.S. economy will look much different once it emerges from this recession. There will be fewer construction jobs and far fewer financial sector jobs, and numerous other shifts. The economy is always in a state of transition to something new, and more so after a deep downturn such as the one gripping the nation now.

On another economic front, the Commerce Department reported Friday that wholesalers reduced inventories by another 1.6 percent in March, the seventh straight month that they've done so. That's a drag on growth but carries a silver lining: The more inventories are reduced, the closer the nation comes to a rebound in production as retailers and manufacturers restock to meet new consumer demand.

"At some point once we clear out excess inventory and sales pick up, and employment will have to pick up," said Kim Whelan, an economic analyst for Wachovia. "It will hopefully start adding to GDP slowly going forward," she said.

In addition to government, health care was another rare sector that added jobs, up 17,000.

Employment in manufacturing fell by 149,000 jobs in April, while construction companies shed another 110,000 jobs. The professional and services industry saw employment fall by 122,000 last month, and retailers cut 47,000 positions. Transportation and warehousing fell by 38,000.

"The hiring of census workers is obscuring a continued steep decline in private-sector jobs. I think we have to start facing up to the fact we're headed for an unemployment rate above 10 percent that will stay high for quite a while," said Lawrence Mishel, the president of the liberal Economic Policy Institute.

Some Wall Street analysts agreed.

"Taking into account the downward revisions to the prior months and the sharp increase in government employment . . . this is a weaker-than-expected report," wrote John Ryding and Conrad DeQuadros, partners in the research firm RDQ Economics, in a research note. "The employment data do not yet corroborate the extent of the diminishment of the intensity of the recession suggested by other economic indicators."

The Bureau of Labor Statistics also revised job losses reported in February downward by 30,000, while losses in March were revised upward by 36,000.

Still, taken together with rising consumer confidence, manufacturing indexes getting close to levels seen during economic expansion and even a slight rise in construction, Friday's jobs report gives support to analysts who see the glass as half full.

"Large pools of 'pent up demand' are forming and will soon begin to be transformed into actual spending. First quarter (growth) estimates indicate that consumer spending is coming back," William Dunkelberg, the chief economist for the National Federation of Independent Business, said in a survey of small businesses released Friday. "Growth could be positive in the third quarter and 4 percent higher in the fourth (compared with the third quarter). It would appear that the reduction in employment . . . has gone too far, raising the possibility of a faster-than-expected recovery in employment later this year."

(Margaret Talev contributed to this article.)

ON THE WEB

The Bureau of Labor Statistics jobs report

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