The economy is still shedding jobs, but at a much slower pace than at the height of the financial crisis this year, according to government figures released Friday. That bolsters the view that the economy is making a slow but steady recovery from the worst downturn in decades.
But for the nearly 16 million people out of a job, it hardly feels like a recovery.
Over the past three months, the economy has shed a net 188,000 jobs a month, down from a pace of 700,000 monthly early this year. As jobs continued to disappear the unemployment rate rose to 10.2 percent in October, up from 9.8 percent in September. It was the first time since 1983 the jobless rate topped 10 percent.
Job losses swept through most industries again last month, from manufacturing and construction to retail and financial. A broader measure of labor force strength that includes people who have settled for part-time jobs or stopped looking for work showed an unemployment rate of 17.5 percent, up from 8.4 percent before the recession began two years ago.
As bad as the report was, it shows continued improvement in the economy, analysts say. A separate report this week showed that new claims for unemployment benefits continue to trend lower, although they are still at extremely high levels historically.
“It is true that it's slow progress, but it's unambiguous progress,” said Robert Barbera, chief economist at ITG.
That is small comfort to the millions of worker who don’t have a paycheck. That loss of income weighs on consumer spending, which accounts for roughly two-thirds of U.S. economic activity. Investors reacted cautiously, and stocks were little changed in midday trading.
President Barack Obama called the new jobs report another illustration of why much more work is needed to spur business creation and consumer spending. Noting legislation he's signing to provide additional unemployment benefits for laid-off workers, Obama said, "I will not rest until all Americans who want work can find work."
The rising level of unemployment also has a spillover effect on the families and friends of those out of work, undermining consumer confidence. If anxious consumers continue to hold back spending, the fragile economic recovery could be in jeopardy.
“Whether Main Street can get over this 10.2 percent rate in terms of psychological impact for the holiday season remains to be seen,” said Tony Crescenzi, a bond portfolio manager at Pimco. “It’s really critical how the shopping season fares because it will affect the production cycle.”
One sign of how hard it still is to find a job: Those out of work for six months or longer rose to 5.6 million, a record. That’s more than a third of the unemployed population.
Hundreds of thousands of those who have lost jobs have exhausted their unemployment benefits, although Obama Friday signed into law a measure extending benefits for almost 2 million people. The bill adds 14 to 20 extra weeks of aid for recipients, marking the fourth time Congress has extended benefits since the recession began.
With six unemployed workers for every posted job opening, those who have jobs are working harder for less money.
And companies are squeezing more work from their existing employees. Productivity, the amount of output per hour worked, jumped 9.5 percent in the third quarter, the Labor Department said Thursday.
That's the sharpest increase in six years and followed a 6.9 percent rise in the second quarter. The increases enable companies to produce more without hiring extra people.
While that may be bad news for workers, it’s been great news for companies trying to rebuild their profits. Those rising corporate profits have helped propel the stock market higher this year.
High unemployment and rising productivity come as good news for the Federal Reserve, which is keeping interest rates at historically low levels to help the banking and financial system repair the damage from the industry's crisis. As long as the labor market is weak, and productivity continues to rise, the Fed stands a better chance of avoiding another outbreak of inflation.
Fed policymakers left rates unchanged after a two-day meeting this week, predicting that "inflation will remain subdued for some time," according to a statement they issued.
But big gains in productivity also hint that labor market conditions are worse than the data suggest, said Mark Zandi, chief economist at Moody’s Economy.com
“Productivity is a great thing, but it depends on what it does,” he said. “If businesses respond to the better productivity and profits by hiring then that’s great, we’re off and running. But if they don't, demand is going to weaken and we’re going to be right back in the soup.”
The number of people who lost their jobs in October may be even higher than the “official” report, which relies on the government survey of business payrolls. A separate Labor Department survey of households found that 589,000 jobs were lost last month.
One reason for the discrepancy is that the payroll survey covers government and larger businesses, said economist David Malpass, president of Encima Global.
“They are doing well because all the credit is going in that direction,” he said. “The bottom line is the (payroll) survey has been overestimating the health of the labor environment.”
Small businesses that have typically been the biggest producer of new jobs face tight credit and don't have the cash to expand their business and hire more workers.
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