By Neil Irwin and Annys Shin
Washington Post Staff Writers
Saturday, May 9, 2009
The economy's decline has slowed in recent weeks, with new evidence about the job market yesterday showing that the nation is no longer in the extraordinary economic downdraft of the winter.
The April employment report, while dismal by conventional measures, is the strongest evidence yet that the recession is moderating; employers cut 539,000 jobs, the fewest since October. That, combined with other signs of economic progress lately, suggests that the chances of a Great Depression-style economic catastrophe have become more remote than they seemed just two months ago, and that forecasts that a turnaround will begin later in the year have a greater chance of coming true.
The recession has entered a new phase, pulling away from an economic abyss into a period of steep, but orderly, decline.
The Labor Department said yesterday that the unemployment rate rose to 8.9 percent in April, from 8.5 percent. A total of 5.7 million jobs have been lost since the recession began in December 2007. April was the sixth-worst month for job losses in recent decades; the other five occurred from November through March.
That follows the successful rollout this week of the government's stress test of major banks, promising sales reports from major retailers, and surveys of businesses and consumers that show growing confidence in the future. Reflecting the greater optimism, the stock market was up 2.4 percent yesterday, as measured by the Standard & Poor's 500-stock index, which is up 37 percent since falling to a 12 1/2 -year low March 9.
"This is an economy in transition," said Robert A. Dye, a senior economist at PNC Financial Services Group. "It's moving out of the free fall that started late last year. That doesn't mean the economy has finished contracting. But it's progress."
Economists believe that employers will continue cutting jobs and the unemployment rate will keep rising for many months to come, possibly into next year. And in the fine print of yesterday's report were plenty of details that are reminders of the brutal job market facing the 13.7 million Americans who are now unemployed -- up 6 million from a year ago.
The jobless rate hit double digits among men, rising to 10 percent, from 9.5 percent. Men disproportionately work in the manufacturing and construction jobs that have been hard hit in this downturn. Among African Americans, the rate soared to 15 percent, from 13.3 percent. Among construction workers, the jobless rate is now 19.7 percent.
Companies also cut back on hours for their workers, with hours for non-managerial staff falling 0.6 percent, continuing their efforts to save on payroll beyond just laying people off.
And part of the reason the pace of job losses moderated is that the Census Bureau ramped up hiring for its 2010 count of Americans. Analysts attributed about half the reduction in the pace of job losses to that action.
"Those are real jobs, and someone who was unemployed is now employed" said Michelle Meyer, a U.S. economist at Barclays Capital. "But they're temporary."
President Obama seized on the continued weak job market to push for new efforts at job training, in particular asking states to change rules so that people do not lose their unemployment benefits when they sign up for training. He also instructed the Labor and Education departments to help unemployed people get Pell grants to help pay tuition for technical schools.
The unemployment rate "underscores the point that we're still in the midst of a recession that was years in the making and will be months or even years in the unmaking, and we should expect further job losses in the months to come," Obama said. Nevertheless, he said, "the gears of our economic engine are slowly beginning to turn."
The evidence that the pace of decline has slowed is increasingly powerful, though at the same time there is no evidence that the downturn has hit bottom. This week, for example, the Institute for Supply Management's survey of service businesses showed that its index of business activity rose to 43.7, from 40.8. But that is still far below 50, the level that represents the line between expansion and contraction.
Meanwhile, indicators from Wall Street suggest stabilization in that sector as well. Aside from the steep rise in the stock market over the last two months, more obscure indicators of the credit markets have improved as well, suggesting money is flowing through the economy more normally. The London interbank offered rate, or Libor, dropped steeply this week, for example, in part due to the positive reaction to government stress tests of major banks.
"The financial system is healing ahead of the economy," said David Shulman, senior economist with the UCLA Anderson Forecast. "The financial system is in the seventh inning, while the economy is still in the fourth inning."
Staff writer Scott Wilson contributed to this report.