Recession wipes out 9 years of job gains
Mounting job losses rattled hopes Thursday that the economy is on track to grow this year, showing prospects for U.S. workers are terrible — and still getting worse.
By the numbers
467,000: Jobs lost in June.
9.5: Percentage of unemployed workers.
16.5: Percentage of so-called underemployed workers (jobless rate, plus part-time workers who want full-time work and those who have quit looking for jobs).
29: Percentage of unemployed out of work at least six months.
24: Percentage of unemployed teenagers.
33: Average workweek in hours, the fewest on record.
The Associated Press
WASHINGTON — Mounting job losses rattled hopes Thursday that the economy is on track to grow this year, showing prospects for U.S. workers are terrible — and still getting worse.
Employers reduced their payrolls by 467,000 jobs in June, the Labor Department said, far more than the 363,000 forecasters had expected. The unemployment rate rose to 9.5 percent, from 9.4 percent in May. And an additional 614,000 people applied for unemployment-insurance benefits last week.
The rate of job losses had decreased every month since January before spiking again in June, and economists believe it is highly likely the unemployment rate will hit double digits this year.
A broader unemployment measure, which includes people working part time who want full-time work and those who have given up looking for a job, already has reached 16.5 percent.
The nation now has the same number of jobs as in 2000 — but 12.5 million more workers.
"This is the only recession since the Great Depression to wipe out all jobs growth from the previous business cycle, a devastating benchmark for the workers of this country and a testament to both the enormity of the current crisis and to the extreme weakness of jobs growth from 2000 to 2007," said Heidi Shierholz, an economist with the Economic Policy Institute, a liberal research center.
Adding to the sense of gloom: Statisticians said average hourly pay was flat in June and average weekly pay fell 1.85 percent. The average workweek fell by a 10th of a percentage point to 33 hours, the lowest level since authorities began keeping records in 1964.
Average earnings and hours worked are important harbingers of economic activity. Consumption drives about two-thirds of U.S. economic activity, and people who work less and earn less tend to spend less, too.
Wall Street didn't like the surprise. The Dow Jones industrial average fell more than 135 points within the first 10 minutes of trading Thursday and ended the day down 223 points, or 2.3 percent.
Europe hurts, too
European stock markets fell sharply as well, after the European Central Bank left its target interest rate unchanged and its president indicated he expects a recovery to begin in mid-2010. Investors have wanted the bank to fight the recession more aggressively, which it seems disinclined to do.
Until Thursday, forecasters and government officials had become more enthusiastic about signs the U.S. economy is stabilizing. Many had begun to think layoffs would taper off, companies would crank up assembly lines and the economy would get back on a path toward growth as the year progressed.
That's still a possibility; economic indicators always send mixed signals during turning points. But Thursday's data, combined with other recent information, undermine the idea that a recovery is imminent.
"This sprayed some Roundup on the green shoots," said David Shulman, a senior economist at the UCLA Anderson Forecast, using a metaphor for signs of economic improvement that Federal Reserve Chairman Ben Bernanke popularized in the spring.
"The economy is in the process of bottoming, but that's different from saying it's recovering."
Consumers and businesses alike are more confident than they were in the winter, according to various surveys, and the stock market is up sharply since March.
But improved confidence alone isn't enough to kick-start an economy undergoing painful adjustments that are leading to continued layoffs. Indeed, economists said the best hope for improvement is for economic-stimulus spending to kick in more vigorously than it has to date.
"We're stuck in a very disappointing scenario, with the private-sector economy looking like it's going to be weaker longer than most anyone expected," said John Silvia, chief economist of Wachovia. "In the second half of the year, the federal government is really going to carry the water for the U.S. economy."
Republicans in Congress assailed the weak numbers as evidence the Obama administration's $800 billion economic-stimulus package isn't working.
"Americans were promised the 'stimulus' would keep the unemployment rate from going above 8 percent," House Minority Leader John Boehner, R-Ohio, said in a statement. "Where are the jobs?"
Too early to judge
Independent economists generally believe it is too early to judge the effectiveness of the stimulus plan, given that the spending package is only starting to ripple through the broad economy.
President Obama predicted Thursday that recovery will take a long time. "As I've said from the moment that I walked into the door of this White House," he said, "it took years for us to get into this mess, and it will take us more than a few months to turn it around."
The June job losses were broad-based, with the steepest among manufacturers, which shed 136,000 positions; the auto industry and suppliers slashed 26,500 jobs.
But white-collar jobs were shed in large numbers as well, with the professional- and business-services sector cutting 118,000 positions, information down 21,000 and financial losing 27,000.
Even the federal government shed jobs, 49,000 of them, as the Census Bureau eliminated temporary positions. The education and health-care sectors were the only major drivers of growth, creating 34,000 positions.
There were some positive signs in the report. The rise in the unemployment rate was the smallest in a year, noted Bernard Baumohl, chief global economist of the Economic Outlook Group. And manufacturing overtime hours were stable, which can be an early sign of economic improvement.
In a separate report Thursday, the Commerce Department said factory orders rose 1.2 percent in May, better than expected.
"The picture that is emerging with increasing clarity is of an economy that has undergone a wrenching recession the last 18 months but is now gradually transitioning into recovery," Baumohl said.
Copyright © 2009 The Seattle Times Company
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