Joblessness jumps to 8.5%

Rate is highest in 25 years

outlook bleak as pace of loss accelerates

April 04, 2009|By Mike Dorning | Mike Dorning,Tribune Washington Bureau

WASHINGTON -The nation's unemployment rate surged to the highest level in a quarter-century last month and, despite signs that the economic crisis might be near bottoming out, hundreds of thousands more Americans are likely to lose their jobs in the months ahead.

The pace of job losses is unprecedented in modern America. With 663,000 jobs eliminated in March alone, the unemployment rate jumped to 8.5 percent, its highest level since late 1983. The net job loss since the recession started at the end of 2007 climbed past 5 million. Almost two-thirds of those jobs were eliminated in the past five months.

And, because unemployment is historically a lagging indicator - tending to climb slowly at the beginning of a downturn but lingering after overall recovery begins - the outlook for workers is grim even in the face of encouraging signs elsewhere in the overall economy.

"Even once we hit recovery, it usually takes several months - up to five months - for the [jobless] rate to come down again," said Diane Swonk, chief economist at Mesirow Financial.

Among the signs of possible renewed economic life, orders placed with factories rose in February after a half-year of declines. Consumer spending rose in February for the second month in a row. And a report on construction spending this week was better than expected.

In addition, the stock market - often considered a leading indicator, though an imperfect one - has been rising lately.

On the plus side, too, money from the Obama administration's $787 billion stimulus package is beginning to flow into the economy. Mortgage financing is easing. Investors have shown confidence in the Treasury Department's plan to deal with the toxic assets that have crippled banks.

"The knife's still falling. It's just not falling as fast," Swonk said.

And the G-20 Summit of world leaders in London this week demonstrated at least a public commitment to a coordinated global response to the economic downturn.

"A lot of action is being taken, and I think that's sort of boosting confidence," said Marisa DiNatale, a senior economist at Moody's

"That's the key to a lot of this. If businesses and consumers feel as though things are going to get better or that we're nearing a bottom, that facilitates that cycle of getting out there and spending money, buying cars or computers, business equipment." Even if the economy does begin to improve, economists expect the employment situation to continue to worsen for many months. Historically, improvements in hiring have not started until well after an economic turnaround. Uncertainty about the pace of a recovery makes businesses cautious about replacing workers.

Most economists forecast that job losses will continue for the rest of the year, and many expect the unemployment rate to peak at 10 percent or more. Some worry that what indicators are really pointing to is a false bottom, a noticeable improvement that does not last.

This is already the steepest contraction in employment since the Great Depression, according to the Economic Policy Institute, a liberal think tank in Washington.

DiNatale noted that much of the favorable economic data comes from a single month, February, that could prove to be a statistical aberration. "You're really only talking about one good month in a string of bad months," DiNatale said.

And government programs for helping with home foreclosures, removing toxic assets from major financial institutions and other aspects of the economic crisis are still in early stages.

Also, it is difficult to predict how consumers will respond in the months ahead. Measures of consumer confidence are at historic lows.

more grim news

The Walt Disney Co. and FedEx Corp. announced almost 3,000 layoffs Friday.

Disney said it had cut 1,900 positions at its U.S. theme parks as part of an announced reorganization, representing about 11 percent of salaried employees in the division.

About 1,200 people were laid off and 700 open positions will be left unfilled in the reorganization begun in 2005 and accelerated by the recession. The vast majority of the cuts came from staff other than park employees who interact with park visitors.

FedEx laid off 1,000 employees Friday to meet job cuts that the package delivery company announced were coming after third-quarter earnings dropped 75 percent.

FedEx said that half of the dismissed workers - all salaried or management - worked in Memphis, Tenn., where the corporation and its largest operating unit, FedEx Express, are headquartered.

Associated Press

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