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November 6, 2009
Idled American workers, this is not your parents’ recession.
Unemployment rocketed above 10 percent in October, the first double-digit rate since the recession in the early 1980s.
But experts warned that the current job-market malaise won’t be cured as easily this time around. And at least one forecaster said Friday’s report means next year will be even worse than previously thought.
The jump in joblessness to 10.2 percent in October also brought some calls for a bigger federal response.
“We’re obviously going to need more stimulus,” said Judy Ancel, director of the Institute for Labor Studies at the University of Missouri-Kansas City.
Jobs remain hard not only to find but also to keep.
Mike Hoffman, 61, of Raytown, lost work this summer but got back on a payroll after three months. In a “double whammy,” that new job disappeared on Monday, Hoffman said while at a Missouri Career Center on Friday.
October’s unemployment rate was the first in double-digits since June 1983. The Labor Department also said payrolls shrank by 190,000 during the month.
Both numbers were higher than forecasters had guessed. The rate exceeded even the highest estimates among 81 economists quizzed by Bloomberg News.
The unemployment rate doesn’t include people without jobs who have stopped looking, or those who settled for part-time jobs. Counting those people, the unemployment rate would be 17.5 percent.
Investors, however, seemed undaunted by the report as stocks nudged higher on expectations that the Federal Reserve will hold interest rates low for some time.
The jobs report came the same day President Barack Obama signed a $24 billion extension of jobless benefits and tax credits for homebuyers, both of which help stimulate economic activity.
“I won’t let up until the Americans who want to find work can find work, and until all Americans can earn enough to raise their families and keep their businesses open,” Obama said.
Democratic Rep. Carolyn Maloney, who heads Congress’s Joint Economic committee, said her party would consider new aid to states, an “infrastructure bank” to increase construction jobs and small-business tax credits.
Concerns about double-digit unemployment reflect doubts that this economy will be able to regenerate the kinds of jobs many of America’s 15.7 million unemployed have lost.
It was easier for the 1983 economy to do that because unemployment reached double digits then mostly because economic activity had slowed.
The economy was much more industrially based then, and layoffs meant temporary idleness. Factories geared back up once the economy began to grow again.
Today’s job market, by contrast, has been racked by structural changes that mean many lost jobs won’t be coming back.
Construction crews disbanded by housing’s bust won’t be reassembling in large numbers anytime soon. And despite some factory expansions, including the addition of a third shift at the General Motors Fairfax plant, much manufacturing work around the country has shifted to machines or foreign factories.
“A lot of this unemployment is structural,” said John Silvia, chief economist for Wells Fargo. “These people have the wrong skills, and they live in the wrong places.”
They’re also getting tagged with the highest rates of unemployment.
According to Friday’s report, unemployment among construction and extraction occupations hit 19.1 percent in October. Production workers’ joblessness reached 14.5 percent.
Sales and office workers fare a bit better than the 10.2 percent average. Management and professional unemployment remained relatively scant at about half the overall average. Moreover, economists say those kinds of jobs will still rebound with the economy, which has begun to grow again after shrinking for a year.
But some kinds of jobs will not.
“What do you do with a 55-year-old auto worker?” asked Chris Kuehl, managing director of Armada Corporate Intelligence in Kansas City.
You can’t send him back to jobs in Detroit, St. Louis or other markets where factories likely have closed for good. Nor do idled production workers have much chance of learning Portuguese and landing a job in Brazil, where such work is expanding, Kuehl said.
For some, the answer to structural unemployment lies in more federal jobs.
Randall Wray, an economics professor at UMKC, said Washington should take on the role of employer of last resort, and perhaps on a permanent basis. He envisions government infrastructure projects on the scale of the 1930s or even more.
“The government has to employ those the private sector doesn’t need and won’t employ,” Wray said.
Ancel said badly needed transportation systems and developing alternative energy sources could make use of construction workers and spur demand for manufactured goods.
“The green jobs were supposed to do that, but we haven’t seen any results of that around here,” Ancel said.
America’s return to double-digit unemployment for the second time since World War II bumps up against other dramatic differences in the economy from the first go-around.
When unemployment topped 10 percent in September 1982, it stayed there for 10 months through June 1983.
During that time, the stock market soared and inflation plunged.
But those events already have taken place in this economy.
The 1983 economy also boomed despite 10 percent unemployment. Growth was flat in late 1982 but reached a blistering 9.3 percent pace by mid-1983.
Most growth forecasts now are much less optimistic.
Ryan Sweet, senior economist at Moody’s Economy.com, said the economy’s recent 3.5 percent growth pace was likely as much as we’ll see for a while.
Sweet said a “new normal” unemployment rate of 6 percent is likely, compared with a normal 5 percent unemployment before this recession began.
Friday’s report did little to brighten that outlook and likely will lead Moody’s to raise its forecast peak rate, currently at 10.5 percent next year, Sweet said.
Some economists preferred to look at Friday’s other jobs number.
The 190,000 jobs lost in October were considerably fewer than losses early in the recession, when half a million or more jobs disappeared each month.
Normally, the unemployment rate rises in the early part of an economic recovery because formerly discouraged workers re-enter the job market.
But that didn’t happen last month, Sweet said. Workers continued to leave the work force.
Friday’s report did show an increase in the number of temporary workers, but the average work week remained at a stunted 33 hours. Both should be increasing in an economic recovery.
“It’s very difficult to find anything encouraging in this report,” Sweet said.
Staff writer Diane Stafford and The Associated Press contributed to this story.
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