Layoffs slow, but companies still wary of hiring

Federal Reserve Chairman Ben Bernanke earlier this week gave his most optimistic prediction yet about the end of the recession, saying he expects the economy to start growing again this year — although the comeback could be weak and more jobs will disappear even after a recovery takes hold.

Companies will have little appetite to ramp up hiring until they feel the economy is truly out of the woods and a recovery is firmly rooted.

Against that backdrop, many economists predict the unemployment rate will hit 10 percent by the end of this year. Bernanke stopped short of that figure, saying it will be somewhere in the 9 percent range. Regardless, both private economists and Bernanke agree the unemployment rate will keep climbing into next year.

The Fed says unemployment will remain elevated into 2011. Economists say the job market may not get back to normal — meaning a 5 percent unemployment rate — until 2013.

And the job cuts have continued this week. Steelmaker Severstal International said it's idling plants in West Virginia and Ohio, resulting in 3,100 layoffs due to the continuing deterioration of the steel industry. Microsoft Corp. said it was starting thousands of the 5,000 job cuts it announced in earlier this year and left the door open to even more layoffs.

The Commerce Department on Friday said wholesale inventories dropped 1.6 percent in March, much larger than the 1 percent fall that analysts had expected. That followed a 1.7 percent drop in February, the largest monthly decline on records that go back 17 years.

It was the seventh straight month that wholesale inventories fell as businesses struggled to get stockpiles in line with plunging sales. Wholesalers saw sales drop 2.4 percent in March, the fifth decline in six months.

Still, glimmers of hope have emerged that the recession may be losing its grip on the country.

The Labor Department on Thursday said the number of newly laid-off workers filing applications for jobless benefits plunged to the lowest level in 14 weeks, a possible sign that the massive wave of layoffs has peaked. Still, the number of unemployed workers drawing benefits climbed to a new record — 6.35 million.

Other reports showed sales at many retailers fared better in April, with Wal-Mart Stores Inc. leading the way.

However, Friday's employment report showed that workers' wages barely budged in April, meaning consumers will probably stay somewhat cautious in the months ahead. Average hourly earnings nudged up to $18.51 in April, a 0.1 percent rise from the previous month.

In the U.S., the economy shrank at faster than a 6 percent annual rate late last year and early this year, the worst six-month performance since the late 1950s. Analysts think it is still shrinking now — but probably at about half that pace. Many predict the economy could start growing in the third or fourth quarter as tax cuts and government spending on big public works projects included in President Barack Obama's $787 billion stimulus package take hold.

Later Friday, Obama was to outline steps to help the unemployed pursue education and training, and keep their unemployment benefits, too. Currently, Americans who are out of work and want to go back to school have to give up their monthly unemployment check. And if they decide to return to school, they often don't qualify for federal grants because eligibility is based upon the previous year's income.

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