Recovery? The 10.2 percent without jobs might beg to differ

McClatchy NewspapersNovember 6, 2009 

Job seekers hand in resumes at a job fair in Livonia, Mich.

PAUL SANCYA / AP

WASHINGTON — As bad as Friday's jobs report was, showing October's unemployment rate jumping sharply to 10.2 percent, the outlook is likely to worsen for American workers well into next year. Economists expect the jobless rate to keep climbing, perhaps above 11 percent, as employers produce more with fewer workers and shy away from hiring.

The nation's unemployment rate leapt by a larger-than-expected four-tenths of a percentage point in October to its highest level since April 1983, even as the pace of job losses slowed sharply, the Labor Department said Friday.

Employers shed 190,000 jobs in October, the slowest pace nearly since the devastating recession began in December 2007. The Bureau of Labor Statistics also revised its August and September unemployment numbers to reflect that 91,000 fewer jobs were lost over those two months than first reported.

That trend is positive. It shows that the torrid pace of job losses in the first half of the year has slowed dramatically. That supports the recent report that the U.S. economy grew at a 3.5 percent annual rate from July through September.

There are other positive signs. The professional and business services sector added 18,000 jobs in October. Temporary employment, which usually precedes a return to broader hiring, was up by almost 34,000 last month, the third straight month of gains.

Yet the surge in the unemployment rate overshadowed all else.

"History tells us that job growth always lags behind economic growth," President Barack Obama cautioned in a statement from the White House Rose Garden, shortly after he signed a new $24 billion economic stimulus bill into law. The measure provides tax incentives to homebuyers and extends unemployment befits for the longtime unemployed. The House of Representatives passed the measure 403-12 Thursday in a rare bipartisan vote, a day after the Senate passed it unanimously.

Obama called the October jobless report "a sobering number that underscores the economic challenges that lie ahead. ... I won't let up until the Americans who want to find work can find work and until all Americans can earn enough to raise their families and keep their businesses open."

When discouraged workers and underemployed ones are factored in, a more broadly defined unemployment rate stands at 17.5 percent. Some 35 percent of the jobless, about 5.6 million Americans, have unable to find work for more than six months.

Many economists had expected unemployment to hit 10 percent this year, but few thought the rate would reach that by October. After Friday's sharp jump, they began revising job forecasts down.

Mark Zandi, the chief economist for Moody's Economy.com, thinks that the jobless rate could hit 11 percent by mid-2010.

"Unemployment is rising while labor force is declining. Once labor force begins to rise, this will add to unemployment, as many coming back in will be unemployed," Zandi said.

Smaller firms, which provide the most jobs, remain cash poor and credit starved. They're expected to continue shedding workers or at best holding the line.

"The job market isn't deteriorating as fast as it was earlier in the year, but it isn't going to improve until next spring at the earliest," Zandi said.

Sageworks Inc., a financial firm that specializes in data about privately held companies, reported that small firms will keep cutting payrolls.

"They're going to reduce their overhead. They're going to reduce their payroll. They represent at least 50 percent of the employment in the United States, and that doesn't look like it's coming back anytime soon," Drew White, the group's chief financial officer, told McClatchy.

Only four sectors of privately held companies are showing revenue growth before expenses this year, he said: health care, utilities, education and information.

Still, some analysts found grounds for optimism.

"What people aren't talking about today and won't talk about for a couple of days is that if you take the peak of job losses and plot the trend, we still get to zero jobs lost sometime in the first quarter of 2010. That means we start adding jobs the next month after we hit zero," Fred Fraenkel, the vice chairman of investment manager The Beacon Trust Co., said in a research note. "Most people are talking about the U.S. starting to add jobs back in the second half of next year. It looks like that will start in the first half of the year, not the second half."

October was the 22nd consecutive month that employers shed jobs, the longest such losing streak since the Great Depression. Nine of those months were under the Obama administration, 13 under the Bush administration.

Last month's job losses followed a familiar script as construction, manufacturing, hospitality and leisure, and the retail sector reduced jobs. Government hiring was flat. Health and education showed some positive growth, and in a pleasant surprise, professional and business services added jobs.

Employers shed an average of 188,000 jobs in each of the past three months, the Labor Department said. That's better than the 357,000 jobs lost on average in each of the three preceding months.

"The payroll change, with the significant upward revisions to August and September, provide further confirmation that economic activity is expanding at a fairly solid pace once the brisk rate of productivity growth is factored in," RDQ Economics, a New York forecaster, said in a research note.

Productivity surged at an annualized rate of 9.5 percent from July to September, the Labor Department reported Thursday. Productivity measures hourly output per worker, so the new number showed that companies were squeezing more out of their workers. Rising productivity signals rising profits, the key to future investment, growth and jobs.

OCTOBER EMPLOYMENT BY SECTOR

_ Construction, fell by 62,000.

_ Manufacturing, down 61,000.

_ Leisure and hospitality, down 37,000.

_ Retail, off 40,000.

_ Government, unchanged.

_ Professional and business services, plus 18,000.

_ Health care and education, plus 45,000.

ON THE WEB

October jobs report

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