Unemployment rate is highest in 26 years

McClatchy NewspapersOctober 2, 2009 

WASHINGTON — The September unemployment numbers announced Friday were a reality check for anyone who was thinking that strong economic growth was just around the corner.

The nation's unemployment rate ticked up to 9.8 percent, its highest level in 26 years, as employers quickened the pace of layoffs, the government said in a worse-than-expected report.

U.S. employers shed 263,000 jobs in September, more than the 150,000 to 200,000 that forecasters had expected. Employment fell in manufacturing, construction, retail and, surprisingly, in government.

Since the recession began in December 2007, the number of unemployed Americans has risen from 7.6 million to 15.1 million. The unemployment rate has doubled to 9.8 percent — the highest since June 1983 — rising another tenth of a percentage point in September.

It was a lousy report from top to bottom, with the average workweek for production and nonsupervisory jobs falling slightly to 33 hours in September. That number should be going up in an economic recovery.

"Today's job report is a sobering reminder that progress comes in fits and starts, and we're going to need to grind out this recovery step by step," President Barack Obama said at the White House.

"I think you've got an economic recovery, but I think the pace of recovery is very disappointing relative to what a lot of people expected," said John Silvia, the chief economist for Wachovia.

One reason Silvia is glum is that consumer confidence remains in the dumps and personal income isn't rising much.

"It's personal income that's going to be under strain here," said Silvia, who concludes that consumers, who drive about 70 percent of U.S. economic activity, won't be the spark for recovery. "Most of the strength in the economy now is federal government spending and inventory correction. How much that carries through (to recovery) is anyone's guess."

If economic growth next year falls short of 3 percent, it won't create the jobs needed to begin lowering the unemployment rate.

"I don't think that we're going to see an upturn in employment until the middle of next year," said David Huether, the chief economist for the National Association of Manufacturers.

Manufacturers have shed 2.1 million jobs since the recession started. Industrial output at U.S. plants hit a record low of 68.1 percent in June. That means that even when the economy picks up, there's a lot of ground to make up to recover fully.

"There's a lot of excess capacity that manufacturers can employ. As that comes on, they are going to expand employment," Huether said, cautioning that job growth will lag the recovery.

With consumers sidelined and makers of goods with lots of slack, businesses aren't hiring.

"I think employers are reluctant to hire permanently, waiting to have more evidence that some of the recovery we are seeing is going to stick around," said Michael Steinmetz, a vice president at Manpower Inc., a large Milwaukee-based company that provides temporary workers.

Larry Summers, the head of the National Economic Council and President Barack Obama's chief economic adviser, noted that the economy no longer is losing 700,000 jobs a month as it was last winter, but he acknowledged that it'll take a while before job growth resumes. "I think we're looking at a period of several months before you will see employment creation," Summers told CNBC.

One reason for his somber assessment: The Labor Department report included important revisions. Employers shed 201,000 jobs in August, not the 216,000 first reported last month. While that's good news, it underscored how bad September's numbers were, since 62,000 more jobs were lost last month than in August. The Bureau of Labor Statistics also said that 304,000 jobs were shed in July, not the 276,000 first reported.

The BLS also revised March's numbers, saying that the 663,000 job losses first reported for the turbulent month were wildly low. Statisticians now think that 824,000 jobs were lost that month, a difference of six-tenths of a percentage point, a whopping miss.

The March revision "shows the huge hole we have been thrown into" by the economy, said Lawrence Mishel, the president of the Economic Policy Institute, a liberal policy-research organization.

More than half a million people stopped looking for work and exited the work force in September, the BLS said. Further, the number of long-term unemployed, people who've been jobless for 27 weeks or longer, keeps rising. In September, 35.6 percent of the 15.1 million unemployed Americans — about 5.4 million people — hadn't had jobs for six months or longer.

"Today's report is evidence that we have a truly massive crisis of long-term unemployment on our hands, especially now that jobless workers are using up the last of their unemployment benefits," Christine Owens, the executive director of the National Employment Law Project, an advocacy group for the unemployed, said in a statement. "Today's employment report is a marching order for Congress to pass unemployment benefit extensions to all states, quickly."

"Our expectation is that companies are going to be extremely conservative about adding staff, especially full-time employees," said Max Caldwell, a managing partner with Tower Perrins, a firm that specializes in human resources.

Companies have streamlined operations, making new full-time hires less likely and contract workers more likely. "I think organizations are inherently more efficient and have learned to operate at some reasonable capacity without the need to be adding a ton of people," Caldwell said.

The first hires back may be temporary.

"Historically, coming out of recessions that's what we have seen, that the contingent staffing agencies see some of the hiring prior to companies putting on permanent staff," said Steinmetz, of Manpower Inc.

SEPTEMBER EMPLOYMENT BY SECTOR:

  • Construction, fell by 64,000.
  • Government, down 53,000.
  • Manufacturing, down 51,000.
  • Retail, off 39,000.
  • Professional and business services, negative by 8,000.
  • Transportation and warehousing, unchanged.
  • Financial services, unchanged.
  • Health care, plus 19,000.

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