Jobless rate rises, but pace slows
Better-than-expected May employment numbers Friday showed that the breathtaking pace of job losses is moderating, but experts warn the unemployment...
WASHINGTON — Better-than-expected May employment numbers Friday showed that the breathtaking pace of job losses is moderating, but experts warn the unemployment rate will continue to climb for months and job growth could remain sluggish for years.
Employers shed 345,000 jobs in May, the fewest since September, and far fewer than the 500,000-plus cuts that forecasters had expected. Job losses also were not as bad in March and April than initially reported: 652,000 in March, not 699,000, and 504,000 in April, not 539,000, the Bureau of Labor Statistics (BLS) reported.
Those numbers show a clear moderating trend; they compare starkly with the 741,000 jobs lost in January, the worst month in the stretch.
While that's better than expected, the BLS also reported the nation's unemployment rate jumped by half a percentage point in May to 9.4 percent, driven up, in part, by 350,000 new entrants to the nation's work force. There are now 14.5 million unemployed Americans.
What these conflicting numbers suggest is that even as the U.S. economy begins climbing out of the recession, the labor market will remain depressed for some time.
After the 1990 and 2001 recessions, the economy continued to lose jobs for months. Once the nation's gross domestic product — or GDP, the total value of goods and services produced — begins to climb again, probably in the second half of this year, it won't feel much like recovery for the jobless.
"It may be a long time after GDP starts growing before we start adding jobs," said Heidi Shierholz, a researcher at the liberal Economic Policy Institute.
When the recession began in December 2007, unemployment was 4.9 percent. It's now 9.4 percent, and most economists expect it to peak at more than 10 percent by 2010. The highest post-World War II unemployment rate was 10.8 percent in 1982. The peak during the Great Depression was 25 percent.
According to the Economic Policy Institute, the economy must add 127,000 jobs a month just to keep up with population growth. That means that to offset the 6 million jobs that have been lost since the recession began and absorb new workers, the economy must create 8 million jobs.
And job losses from the shrinking automotive industry haven't yet registered.
"Obviously, we haven't seen the impact of dealership closings from Chrysler and General Motors. I don't think we've turned the corner yet, and all the signals are kind of mixed," said Ravin Jesuthasan, of the human-resources consultancy Towers Perrin.
After the 2001 recession, employment never returned to the peaks of the 1990s.
"There won't be a snapback in employment. Employers are going to be very cautious," Jesuthasan said. He pointed to structural economic changes, such as companies pushing more expensive labor-intensive work abroad or to contractors. "You are going to see wage growth constrained."
Hourly wages grew at a 3.9 percent annual rate from December 2007 to December 2008, but since then they've grown at a 1.3 percent annual rate, the BLS reported.
In recent years, companies have transferred more health-care costs to employees and farmed out anything that isn't core to the companies' missions. Experts think companies will keep lowering their fixed costs and reward employees not with salary but with bonuses or contributing to employee 401(k) retirement funds.
Wachovia chief economist John Silvia wrote in a note to investors that, "The duration of unemployment continues to rise, suggesting continued stress on unemployed workers, who realize their unemployment will be longer than they feared. Rising duration suggests higher consumer-credit-delinquency rates."
The BLS also reported that the length of the average workweek fell in May to 33.1 hours, the lowest since record-keeping began in 1964. Rather than fire workers, many employers are slashing hours, freezing pay and requiring employees to take unpaid leave.
In addition, when part-time workers who can't find full-time jobs and laid-off workers who've stopped looking are factored in, the May unemployment rate soars to 16.4 percent, the BLS said.
"I think we have a lot of hurt in the pipeline, and I think we're going to have high unemployment for a very long time," said Lawrence Mishel, president of the Economic Policy Institute.
Copyright © 2009 The Seattle Times Company
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