WASHINGTON - - The surge in the nation's unemployment rate last month to a 26-year high underscored that the weak labor market remains a menacing threat to the economic recovery.
Employers dropped another 216,000 nonfarm jobs in August, pushing up the unemployment rate to 9.7% from 9.4% in July, the Labor Department reported Friday.
The latest losses were smaller than the 276,000 jobs eliminated in July and a third of the monthly cuts in the first quarter, a trend that apparently encouraged investors and sparked a rally on Wall Street. But on Main Street, the retrenchment by employers has been so broad and deep that more and more baby boomers in the prime of their careers are getting caught in layoffs.
During the prior two recessions, in 1990-91 and 2001, people in their mid-40s to mid-50s continued to show employment gains as younger workers felt the brunt of the cutbacks. But since the current economic downturn began in December 2007, employment in the 45-54 age group has fallen by more than 1.2 million, according to the Labor Department.
"It's an across-the-board pain," said David Card, a labor economist at the University of California, Berkeley.
The labor woes of this group may be of particular concern, analysts say, because many of them are in the prime of their wage-earning years and also saw substantial losses in housing and stock wealth. Worried about saving for retirement and paying their children's college tuitions, they have slashed their discretionary spending - something that is being felt especially hard by retailers and consumer-product businesses, which are responding by trimming even more workers.
Even as the broader economy shows signs of reviving, thanks in part to the government's economic stimulus package, many economists regard solid consumer spending as a key to a sustained recovery. But with hiring sluggish and unemployment expected to hit 10 percent later this year and stay high for some time, many people aren't opening up their pocketbooks, especially those without jobs.
By the government's count, more than 14.9 million Americans are jobless on this Labor Day weekend.
Deborah Peterson, of Long Beach, Calif., is one of them. The 51-year-old has been out of work since April 2008, when she was laid off with 4,000 other employees at Hertz Corp. On Friday, Peterson recalled living large as a regional manager of membership programs for the rental car firm, pulling in around $90,000 a year, including company perks.
"I had all the luxuries of life, but now I'm buying the 50-cent on-sale food items and living on a shoestring," she said, adding that she rarely goes to the movies and drives a 10-year-old Chrysler Sebring.
Peterson's last salary was near the top of her career. Even after more than a year without a job, she remains selective about the kind of job she will take on, applying for regional manager and business development roles.
Peterson, who is single, said she had to at least match her previous salary to make the mortgage payments on her condo.
The Labor Department said Friday that a record five million people have been unemployed for six months or longer, prompting advocacy groups to call on Congress to immediately expand jobless benefits when it returns from summer recess next week.
"Failure to act quickly to expand benefits for those running out will deal a severe setback to the hoped-for recovery," said Christine Owens, executive director of the National Employment Law Project, which has estimated that unemployment checks will expire for 1.3 million workers by year's end.
Officials in the Obama administration stopped short of saying that the White House would push for additional extensions in jobless benefits. But Jared Bernstein, economic adviser to Vice President Joe Biden, said Friday that "we're definitely working with Congress to examine that kind of option."
Like others on the Obama team, Bernstein trumpeted the president's economic stimulus package as helping to pull the economy back from the brink. "Moving from losing 700,000 jobs a month [in the first quarter] to a third of that last month is a very important improvement," he said in an interview.
Bernstein said that with only a third of the $787 billion stimulus package having been spent, "there's still considerable firepower left." Yet even by the White House's own projections, the unemployment rate will hit 10 percent in the fourth quarter and average 9.8 percent next year and 8.6 percent in 2011. The jobless rate averaged 4.6 percent in 2007.
The large number of unemployed middle-aged workers is likely to prolong the overall weakness in the job market. Because of their experience and generally higher wage requirements, it will take these workers longer to find jobs. Some will have to settle for considerably smaller pay, and others will find it tough to pursue opportunities out of their region because they can't sell their homes or owe more than they're worth.
Retraining may be an option for many workers, if only people could pinpoint where the jobs are going to come from. "Exactly what sector is going to lead us out of the recession?" asked economist Card.
Friday's jobs report showed that apart from health and education services, every major sector reduced payrolls in August.
Manufacturing and construction once again led the job cuts, eliminating more than 60,000 jobs each. Although the pace of job losses have slowed, these two sectors have accounted for about half of the six million job losses in the past 12 months.
Younger workers have borne the brunt of layoffs at factories and construction sites. But broad-based cuts in the service industry, including financial activities and professional services such as accounting, have hit workers young and old.
The temporary-help industry, often an harbinger of broader hiring, lost 6,500 jobs last month.
