Friday, September 4, 2009

Joblessness rises to 26 year high

The latest jobs report from the Department of Labor is a glass half full and half empty.

While job loss was the smallest in the past year, the nation’s employers still shed more than 200,000 jobs and the unemployment rate rose to 9.7%, its highest in 26 years. The fact that losing 216,000 jobs is seen as progress indicates how deep this recession has been and how far the economy has to climb

The recession has eliminated a net total of 6.9 million jobs since it began in December 2007.

There are now 14.9 million Americans unemployed. The recession has wiped out all of the jobs created during the Administration of President George W. Bush. We have lost so many jobs that we have less than we did before the 2001 recession.

Even these numbers undercount the lack of employment because the nation needs to add 150,000 jobs a month simply to absorb the new workers entering the labor market. By that measure in August we fell 350,000 jobs short.

If laid-off workers who have settled for part-time work or have given up looking for new jobs (discouraged workers) are included, the so-called underemployment rate reached 16.8 percent, the highest on records dating from 1994.

Another disturbing sign is that the number of workers who have been unemployed for six months or more is at a record level. The long term unemployed are starting to run out of unemployment benefits, extended benefits and even their emergency payments from the government. If Congress does not act to extend their benefits again, their decline in income will act as a drag on the economy.

Job cuts remain widespread across many sectors. The construction industry lost 65,00 jobs. Factories cut 63,000, while retailers pared 9,600 positions. The financial sector eliminated 28,000 jobs, while professional and business services dropped 22,000. Even the government lost 18,000 jobs, as the U.S. Postal Service cut 8,500 positions. These figures offer few signs that employers who have slashed their payrolls to conserve money were ready to hire again. Economists say employers must create 300,000 to 400,000 jobs a month to bring unemployment rates back to pre-recession levels

Health care and educational services were the only bright spot, adding 52,000 jobs.

The fact that jobs loss has moderated reflects the impact of the Obama administration’s $877 million stimulus package which has begun to impact the economy and the efforts of the Treasury Department and the Federal Reserve to shore up the nation’s financial system.

Public spending including the now ended "Cash for Clunkers” program have had their intended effect of increasing demand and stimulating production and sales. But employers are clearly reluctant to hire and consumers to spend. Since consumer spending is 70% of the economy, it is hard to see a revival of economic growth until unemployment declines and wages grow. The concern now is whether the federal stimulus is large enough to effectively jump start the economy or whether the current signs of growth and slow down in job loss are a temporary blip that will fad as the stimulus dollars work their way through the economy.

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