Credit Commentary

Unemployment rate stays at 10% in Dec'09, but job losses are more than expected

By Administrator on Monday, January 11 2010

The U.S. economy ended the worst year of employment losses since the Great Depression with an unexpectedly large drop of 85,000 jobs in December.

The unemployment rate for Dec 2009 was unchanged from Nov 2009 at 10% but that was only because droves of people, including many discouraged about the prospects of finding work, dropped out of the labor force and were no longer counted as unemployed. The increased number of discouraged workers is masking the true extent of joblessness. Had the labor force not decreased by 661,000 last month, the jobless rate would have been 10.4%.

The number of discouraged workers, those not looking for work because they believe none is available, climbed to 929,000 last month, the most since records began in 1994. The economy needs to create roughly 125,000 net jobs a month to keep pace with the growing population and workforce, and economists say it will take several years to make up for the roughly 8 million jobs lost since late 2007

The latest report was all the more disappointing because the employment data for November raised hopes that the steep, two-year-long employment decline had hit bottom. And revised figures showed the economy added a net 4,000 jobs in November instead of losing 11,000 as initially estimated.

But in December, large payroll cuts in construction and manufacturing, possibly inflated a bit by the weather, as well as smaller losses in other industries again took their toll on the employment picture. And job increases in health and education services and the temporary-help industry were not large enough to offset the losses.

By the latest tally, the economy has shed about 7.3 million jobs since the recession began in December 2007, almost half of them since President Obama's $787-billion economic stimulus program was passed by Congress last February.

In December, the number of people working or looking for work declined 661,000 from November and more than 1.5 million from December 2008. The last time there was an annual decline in the labor force was in 1951. Before the recession, the labor force had been growing at about 1% a year, in tandem with the growth of the working-age population.

Despite recent signs of improvement in the housing and manufacturing industries, the report showed that construction employers cut 53,000 jobs last month, and manufacturing added to the misery by eliminating 27,000 positions. The two industries have borne the brunt of the job losses during the recession.

In the larger service-producing part of the economy, payroll declines have eased more significantly, but most sectors are still not adding net jobs. Retailers overall cut 10,000 jobs last month, even as they reported stronger-than-expected holiday sales this week. Leisure and hospitality businesses gave up 25,000 positions and government payrolls shrank by 21,000.

The two major industries that added jobs were health and education, which expanded by 35,000 and professional and business services, where employment rose by 50,000, boosted by the addition of 47,000 temporary-help jobs.

 

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