Jobless rate tops 10 pct. for first time since '83

[samanthajane13]

By CHRISTOPHER S. RUGABER, AP Economics Writer Christopher S. Rugaber, Ap Economics Writer – 23 mins ago

WASHINGTON – The unemployment rate has passed the psychological threshold of 10 percent for the first time since 1983 — and is likely to go higher.

Nearly 16 million people can't find jobs even though the worst recession since the Great Depression has apparently ended. Persistently high unemployment could hurt the recovery by restraining consumer spending, which accounts for 70 percent of the economy.

The report showed that the nation faces a jobless recovery — an economy that can't create jobs even though it is growing.

The unemployed rate jumped to 10.2 percent last month, the highest since April 1983, from 9.8 percent in September, the Labor Department said Friday. The economy shed a net total of 190,000 jobs, more than economists had expected.

The number of unemployed hit 15.7 million, up from 15.1 million. The job losses occurred across most industries, from manufacturing and construction to retail and financial. The job-loss total is based on a survey of businesses, separate from a survey of households that produces the unemployment rate.

Economists say the unemployment rate could reach 10.5 percent next year because employers remain reluctant to hire.

"It's a stark reminder of how much work remains to be done to get people back to work," Christina Romer, head of President Barack Obama's Council of Economic Advisers, acknowledged in an interview with The Associated Press.

Some positive signs emerged in the data, Romer said, pointing to a 34,000 increase in temporary service jobs.

"That's often the first sign of firms kind of dipping their toe back into hiring people," she said.

Still, counting those who have settled for part-time jobs or stopped looking for work, the unemployment rate would be 17.5 percent, the highest on records dating from 1994.

"It's not a good report," said Dan Greenhaus, chief economic strategist for New York-based investment firm Miller Tabak & Co. "What we're seeing is a validation of the idea that a jobless recovery is perfectly on track."

Friday's report is the first since the government said last week that the economy grew at a 3.5 percent annual rate in the July-September quarter, the strongest signal yet that the economy is rebounding. But that isn't fast enough to spur rapid hiring.

"You need explosive growth to take the unemployment rate down," Greenhaus said in an interview Thursday.

The economy soared by nearly 8 percent in 1983 after a steep recession, Greenhaus said, lowering the jobless rate by 2.5 percentage points that year. But the economy is unlikely to improve that fast this time, as consumers remain cautious and tight credit hinders businesses. In fact, many analysts expect economic growth to moderate early next year, as the impact of various government stimulus programs aimed at home and car buying fade.

The stock market seesawed in early trading. The Dow Jones industrial average added about 4 points, while broader indexes were mixed.

High unemployment is likely to become a political liability for Obama and Democrats in Congress. Most economists expect the jobless rate will remain above 9 percent through next November, when congressional elections are held. When unemployment topped 10 percent in the fall of 1982, President Ronald Reagan's Republican Party lost 26 seats in the House.

One sign of how hard it still is to find a job: The number of Americans who have been out of work for six months or longer rose to 5.6 million, a record. They account for 35.6 percent of the unemployed population, matching a record set last month.

Congress sought to address the impact of long-term unemployment this week by approving legislation extending jobless benefits for the fourth time since the recession began. The bill would add 14 to 20 extra weeks of aid and is intended to prevent almost 2 million recipients from running out of unemployment insurance during the upcoming holiday season. Obama is expected to quickly sign the legislation.

October was the 22nd straight month the U.S. economy has shed jobs, the longest on records dating back 70 years. The report showed job losses remain widespread across many industries. Manufacturers eliminated a net total of 61,000 jobs, the most in four months. Construction shed 62,000 jobs, down slightly from the previous month.

Retailers, the financial sector and leisure and hospitality companies all continued to reduce payrolls. The economy has lost a net total of 7.3 million jobs since the recession began in December 2007.

The average work week was unchanged at 33 hours, a disappointment because employers are expected to add more hours for current workers before they begin hiring new ones.

There were some bright spots in the report. Professional and business services companies added 18,000 jobs. And temporary employment grew by 33,700 jobs, after losing positions for months. That's a positive sign because employers are likely to add temporary workers before hiring permanent ones.

Still, economists expect jobs likely will remain scarce even as the economy improves. Diane Swonk, chief economist at Mesirow Financial, said that small businesses, a primary engine of job creation, still face tight credit and don't have the cash reserves to support extra workers.

And many companies are squeezing more production from their existing work forces. Productivity, the amount of output per hour worked, jumped 9.5 percent in the third quarter, the Labor Department said Thursday.

That's the sharpest increase in six years and followed a 6.9 percent rise in the second quarter. The increases enable companies to produce more without hiring extra people.

The Federal Reserve said earlier this week that it will keep a key interest rate at a record low level of nearly zero for an "extended period" to support the economy.

The central bank said economic activity has "continued to pick up," but Fed Chairman Ben Bernanke and his colleagues warned that rising joblessness and tight credit could restrain the rebound in the months ahead.

While the unemployment rate hasn't yet topped the post-World War II high of 10.8 percent set in December 1982, many experts say this recession is worse.

The work force, on average, is older now as the baby boomers have aged and fewer teenagers are out looking for work. Gary Burtless, an economist at the Brookings Institution, notes that older workers are more likely to be employed than younger ones. As a result, it takes a tougher job market to push the rate to 10 percent.

"This may be the toughest employment situation we've seen in the postwar era," Mark Gertler, an economics professor at New York University, said in an interview earlier this week.

___

Associated Press Writer Jim Kuhnhenn contributed to this report.


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[samanthajane13]

New $100 billion safety net for jobless in works
By ANDREW TAYLOR, Associated Press Writer Andrew Taylor, Associated Press Writer – 1 hr 31 mins ago

WASHINGTON – As unemployment spikes, the cost of compassion is going up too.

By as much as $100 billion.

That's the potential price of a push by Democrats in Congress to continue providing extra help to the jobless beyond the core 26-week unemployment insurance package provided under permanent law.

The jaw-dropping numbers combine the approximately $85 billion cost of continuing emergency benefits through 2010 for the long-term unemployed — jobless more than six months — plus an estimated $15 billion to continue subsidies to help pay health insurance premiums.

Even before the last new round of extended benefits in November, the cost of unemployment compensation was estimated by the White House to exceed $140 billion for fiscal 2010, which began in October. Just two years ago — when the unemployment rate was 4.8 percent in contrast to the current 10.2 percent — the cost of unemployment benefits was only $43 billion.

Extending unemployment benefits again is an obvious solution to Democrats preaching compassion for the long-term jobless, as well as to economists who say cutting off the flow of money could harm the economy.

"This is the most effective way to get money into the economy. It's given to people who are simply out of money," said Rep. Jim McDermott, D-Wash., a key supporter. "They're spending it. They're not socking it away in a mattress somewhere."

Several temporary benefit extensions dating from mid-2008 are set to expire Dec. 31. In January alone, an estimated 1 million people will lose benefits as their extended coverage runs out. By March, 3 million people will have lost benefits averaging about $315 a week.

Also expiring is a program subsidizing 65 percent of insurance premiums for unemployed people who sign up for a continuation of health benefits formerly provided by their employer under the so-called COBRA program. The nine months of COBRA subsidies and the additional weeks of unemployment benefits were both core pieces of February's economic stimulus plan.

The COBRA health insurance subsidies expire Dec. 1 for those who signed onto the program when it first started last winter, though people who get fired before Jan. 1 are eligible for the full nine-month subsidy. People on unemployment would be able to finish out their present "tier" of benefits but would be ineligible for any of the recently passed additional coverage.

The benefits extension is under discussion among top Democratic leaders. While there's no agreement on a specific plan, there's a lot of sentiment behind a full-year extension, congressional aides say. The staggering cost, however, could preclude passing it.

With the budget deficit spiraling out of control, deficit hawks are certain to balk at the measure's price tag. And the White House, which is signaling that it is going to focus next year on trying to rein in the deficit, is not endorsing a full-year extension of benefits. Budget office spokesman Tom Gavin would only say the administration supports some extension beyond Dec. 31.

"We're past the point where anything can be deficit financed without some plan to pay for it," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. "It has to come with offsets."

Many economists say increasing or extending unemployment payments is among the most efficient ways to jump-start the economy. It's easy to do and the people getting the benefits typically spend the money quickly. With the economy in a fragile recovery, cutting off benefits could be harmful.

"It would significantly raise the risk of falling back into recession next year," said Mark Zandi, chief economist at Moody's Economy.com.

Not all economists agree, however, especially if the benefits are financed by adding to the nation's $12 trillion debt. There's also evidence that unemployment insurance actually raises the jobless rate slightly because some people don't look for work as diligently as they do when they're on it.

"The longer you extend unemployment benefits, the longer you extend average job searches," said Ken Mayland, president of ClearView Economics. "It makes it more comfortable for people to be unemployed."

While most Republicans supported a recent bill adding 14 to 20 weeks of extra benefits for those who had exhausted payments lasting as long as a year and a half, many are likely to resist the upcoming measure.

"Calling more government spending and more debt a 'jobs package' is laughable, and the Democrats' frantic push for more of the same is yet another acknowledgment that their trillion-dollar stimulus isn't working," said Minority Leader John Boehner, R-Ohio.

The startling price tag of extending the benefits is due to two factors: the sharp spike in the jobless numbers and several layers of additional weeks of benefits that have been approved by Congress since June 2008.

The core benefit is 26 weeks, with up to 20 additional weeks in states with high unemployment. States collectively are already projected to run a $57 billion deficit in the core program in 2010. The federal government is already obligated to lend them the money to cover that gap.

Additional tiers of benefits were added in 2008. February's stimulus measure not only renewed those benefits but added $25 a week to every unemployment check.


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[samanthajane13]

Unexpected drop in jobless rate sparks optimism
By CHRISTOPHER S. RUGABER, AP Economics Writer Christopher S. Rugaber, Ap Economics Writer – 16 mins ago

WASHINGTON – A surprising drop in the unemployment rate and far fewer job losses last month cheered investors Friday and raised hopes for a sustained economic recovery.

The rate unexpectedly fell to 10 percent, from 10.2 percent in October, as employers cut the fewest number of jobs since the recession began. The government also said 159,000 fewer jobs were lost in September and October than first reported.

If part-time workers who want full time jobs and laid-off workers who have given up looking for jobs are included, the so-called underemployment rate also fell, to 17.2 percent from 17.5 percent in October.

The better-than-expected figures provided a rare dose of good news for a labor market that's lost 7.2 million jobs in two years. Still, the respite may be temporary.

Job creation is expected to remain far too weak in coming months to absorb the 15.4 million unemployed people who are seeking work — and the 11.5 million others who are underemployed. As more people begin seeking work, the jobless rate is likely to resume rising.

The report offered evidence of how hard it remains to find a job: The number of people unemployed for at least six months rose last month to 5.9 million. And the average length of unemployment has risen to more than 28 weeks, the longest on records dating from 1948.

Even counting last month's decline, the unemployment rate has more than doubled since the recession began in December 2007, when it stood at 4.9 percent. And the underemployment rate has jumped to 17.2 percent from 8.7 percent.

"We will need very substantial job growth to get unemployment lower, especially when the labor force ... starts growing again," said Lawrence Mishel, president of the Economic Policy Institute, a liberal think tank.

Still, economists and investors drew hope from the Labor Department report. It said the economy shed 11,000 jobs last month — a sharp improvement from October's revised total of 111,000. And it was much better than the 130,000 Wall Street economists had expected.

The average work week also rose to 33.2 hours, from a record low of 33 hours, along with average earnings. Economists expect employers will increase hours for their current workers before hiring new ones.

"We've still got a long way to go, but the good news in this report provides important positive momentum," said Carl Riccadonna, senior U.S. economist at Deutsche Bank.

The White House said President Barack Obama was pleased that the economy is moving in the right direction but wants to press harder on creating jobs.

Press secretary Robert Gibbs said the new employment figures show the economy is making much-needed progress and is "getting the right trend going in hiring." But Gibbs told reporters that the nation must "get back to an economy that is not just growing but is creating jobs."

The stock market initially jumped in response to the news, before giving back its gains by late morning. Shortly after noon, the Dow Jones industrial average was down about 10 points. Broader stock averages were mixed.

The increase in hours worked means employees are earning more income, Riccadonna said, which could help boost consumer spending and enable Americans to pay down more debt.

Average weekly earnings jumped $4.08 to $622.17, the report said.

Temporary help services added 52,000 jobs, the fourth straight increase. That's also positive news, because companies are likely to hire temporary workers before adding permanent ones. Total employment usually starts to increase between three and six months after temporary employment, Riccadonna said.

The economy has now lost jobs for 23 straight months. But the small decline in November indicates the nation could begin generating jobs soon. Many economists think it will happen in the first quarter of next year.

David Rosenberg, chief economist for Canadian wealth management firm Gluskin Sheff, said the 7 point difference between the jobless rate and underemployment rate is almost double the usual gap. That's an indication of how many more people are likely to be looking for work in coming months.

Another worrisome sign: The National Federation of Independent Business said Thursday that a monthly survey of its small business members showed that more companies plan to reduce employment in the next three months than plan to add jobs.

And a survey by outplacement firm Challenger, Gray & Christmas Thursday found a sharp drop in the number of companies planning to hire workers in November, compared with the previous month.

The services sector gained 58,000 jobs last month, while manufacturing and construction shed 68,000 positions. Education and health services added 40,000 jobs, and government employment rose 7,000.

The unemployment rate fell because the number of jobless Americans dropped by 325,000 to 15.4 million. The jobless rate is calculated from a survey of households. The number of jobs lost or gained, by contrast, is calculated from a separate survey of business and government establishments. The two surveys can sometimes vary.

The unemployment rate also dropped because fewer people are looking for work. The size of the labor force, which includes the employed and those actively searching for jobs, has fallen by 1.2 million in the past six months. That indicates more of the unemployed are giving up on looking for work.

The participation rate, or the percentage of the population employed or looking for work, fell to 65 percent, the lowest since the recession began. Once laid-off people stop hunting for jobs, they are no longer counted in the unemployment rate.

Even as layoffs are easing, the slow pace of hiring is causing headaches for political leaders. The employment report comes a day after President Barack Obama hosted a "jobs summit" at the White House, where he told economists, business executives and union leaders that he is "open to every demonstrably good idea" to create jobs.

Christina Romer, the head of the president's Council of Economic Advisers, called the jobs report "unquestionably good news." She cautioned into reading too much into one month's number, noting that the data can be "volatile."

"We have seen the economic recovery in the sense of (gross domestic product) growing again, we have seen stabilization in our financial markets," she said in an interview with the Associated Press. "I think this could be a sign that that is finally getting to the job market."

Democrats in Congress are considering legislation that would extend jobless benefits for those who have run out and help the unemployed pay for health care coverage. Those measures could cost up to $100 billion.

___

Associated Press Writer Julie Pace contributed to this report.


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