Joblessness expected to get worse

Economists say October's surprisingly high 10.2% rate could reach 11% by mid-2010.

McClatchy NewspapersNovember 7, 2009 

— As bad as the Friday 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 benefits 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.

When discouraged workers and underemployed ones are factored in, a more broadly defined unemployment rate stands at 17.5 percent. About 35 percent of the jobless, roughly 5.6 million Americans, have been 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.

Mark Zandi, chief economist for Moody's, thinks the rate could hit 11 percent by mid-2010. Smaller firms, which provide the most jobs, remain cash poor and credit starved. They're expected to continue shedding workers or at best hold 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.

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