Easing job losses point to wobbly recovery

John W. Schoen Senior producer • Profile • E-mail

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.

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