Unemployment Hits 26-year High

Job Losses In June Bigger Than Expected As Nationwide Jobless Rate Reaches 9.5 Percent

July 03, 2009|By Don Lee | Don Lee,Tribune Newspapers

WASHINGTON - -The government report Thursday that the nation's unemployment picture took an unexpectedly sharp turn for the worse after four straight months of moderately encouraging news was a sobering jolt to hopes that the economy might gradually be getting back on track.

The overall unemployment rate edged up just a notch, to a 26-year high of 9.5 percent in June, but the loss of 467,000 payroll jobs made it clear that the worst economic crisis since the Great Depression was far from over - at least for American workers.

And the size of the payroll loss was unexpected and reversed a four-month trend in which the size of the loss had been shrinking from the January peak of 741,000 jobs eliminated. The steady reduction in total jobs lost had raised hopes that an actual turnaround might be approaching.

No longer.

"The green shoots in the job market are hard to find," said Sung Won Sohn, an economist at Cal State Channel Islands in Camarillo, Calif., noting that cutbacks came across virtually every major industry.

Since the recession began in December 2007, the ranks of the unemployed have almost doubled to 14.7 million, and nonfarm employers have eliminated 6.5 million jobs.

Thursday's disappointing report dragged down stock markets around the world and gave Republican politicians fresh ammunition to criticize President Barack Obama's $787 billion economic stimulus program as ineffective in creating jobs.

In a measure of just how bad the employment situation has become, the Economic Policy Institute in Washington said the current economic decline has now erased the accumulated payroll growth of the last nine years.

"This is the only recession since the Great Depression to wipe out all the jobs growth from the previous business cycle," said EPI economist Heidi Shierholz.

Obama administration officials called for patience and vowed to do whatever was necessary to revive the economy and the labor market.

"We're going to keep doing everything we can to offset the pain and set this economy up for a robust expansion," said Jared Bernstein, chief economist and economic policy adviser to Vice President Joe Biden.

He said he saw one large positive sign in the Labor Department's monthly report: With the June numbers, the pace of job losses for the second quarter as a whole had fallen to 436,000 a month, on average, down from an average monthly contraction of 691,000 jobs in the first quarter.

But others, including Wall Street, looked at it differently. Since January, the pace of payroll cuts had moderated through May, when employment fell by a revised 322,000.

Analysts had expected the economy to lose about 350,000 jobs in June.

The renewed acceleration in job losses contrasted with a batch of recent economic reports that signaled improvements in various parts of the economy, including housing and manufacturing. A separate government report , for instance, showed that factory orders in May increased by the largest amount in nearly a year.

Unemployment is always a lagging indicator and many economists still expect the economy to start growing again later this year. But the latest jobs report offers evidence that the labor market could remain sluggish for months or years to come.

The unemployment rate for men reached 10 percent. The jobless figure for women was 7.6 percent.

The figures would have been higher were it not for a drop in the number of people participating in the job market, including discouraged workers who have dropped out of the labor force because they don't think they can find jobs.

Of particular concern, the number of long-term unemployed - those out of work for 27 weeks or more - swelled by 433,000 last month to 4.4 million, the report said. This group now represents 29 percent of unemployed workers.

"This is going to be a bigger and bigger social problem going into next year," said David Card, a labor economist at the University of California, Berkeley.

Employers in every major sector ratcheted up the job cuts last month, with the exception of health and education services, which added 34,000 jobs over the month.

Manufacturing employment continued to sink, dropping another 136,000 positions, as the battered auto industry and related transportation industry contracted. The construction industry cut 79,000 jobs last month and is now down 1 million jobs from a year ago, masking job gains from some 2,000 projects in the Obama Recovery Act that already have been launched.

Professional and business services eliminated 118,000 positions last month, retail trade gave up 21,000 jobs, and even government, which had been one of the bright spots in this recession, thinned its rolls by 52,000.

That was partly due to an end of temporary work at the Census Bureau, but with many states, notably California, grappling with a severe budget crisis, the government is no longer a haven.

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