Job-Loss Rate Slows, but Ranks Rising

[Chart: Monthly change in non-farm employment]
By Neil Irwin
Washington Post Staff Writer
Saturday, June 6, 2009

Employers are slashing jobs at a more measured rate than in recent months, the government said yesterday, the strongest evidence yet that the economy is no longer in a state of near-collapse.

The nation lost 345,000 jobs in May, far fewer than economists had expected. As more people went looking for work, the unemployment rate, which is based on a survey of households rather than of businesses, soared from 8.9 percent to 9.4 percent, the highest level since 1983.

The latest figures highlighted the reality facing American workers a year and half into the recession. Even as the pace of economic decline appears to have slowed, the ranks of the jobless are likely to continue to increase. Many economists believe the unemployment rate will hit double-digits by the end of the summer and keep climbing well into next year.

As of last month, one in six American workers -- 16.4 percent -- were unemployed, based on a broader measure of joblessness that includes those working part time who want full-time jobs and people who want a job but have given up looking.

The good news is that May marked the slowest rate of job loss since September. The Labor Department also said that not quite as many jobs were lost in March and April as first estimated. Job losses peaked in January, at 741,000, and have declined every month since then.

"It's still a nightmare, but less of a nightmare than earlier in the year," said Heidi Shierholz, an economist at the Economic Policy Institute.

The slower pace of job losses is consistent with other indications that the days of economic freefall have passed. Surveys of business conditions have perked up in recent months, and consumer spending shows signs of leveling off. The housing market may be finally finding a bottom, with sales activity stable in recent months.

Businesses are still highly reluctant to hire, but there have been some signs of a change in tone in recent weeks.

"The attitude is a little more positive," said Roy Krause, chief executive of employment services company Spherion. "They're not adding jobs, but I think we're bouncing around at the bottom now. We're not calling a turn in the economy, but it has been encouraging."

Unemployment typically lags other measures of economic activity. Even after gross domestic product starts increasing -- when factories start cranking out more goods, consumers return to stores and businesses start to eschew layoffs -- the jobless rate keeps rising.

Among the reasons: Even once companies stop cutting jobs, many are reluctant to begin hiring again until they are certain the economy is on strong footing. Also, as the economy starts to look better, some people who had given up looking for work may start looking for a job, returning them to the ranks of the unemployed.

In May, the unemployment rate rose quickly among almost all demographic groups, with the steepest rises among teenagers (up 1.2 percentage points to 22.7 percent) and Hispanics (up 1.4 percentage points to 12.7 percent). The number of people unemployed for more than 27 weeks has soared even faster than total joblessness, with 3.9 million Americans having been jobless for 27 weeks or more -- nearly double the number of a year earlier.

"We know that unemployment is persistent, and it's lasting longer than we've seen in a number of decades," Labor Secretary Hilda L. Solis said in an interview. She said that the administration is directing more resources to job-training programs to try to prepare those who are out of work for jobs in sectors that are growing. "We need to put people in new careers, so people who were putting windshields in automobiles can get jobs making solar panels at the same plant," Solis said.

Part of the reason yesterday's job loss figures were not as bad as expected was because the construction industry no longer shed jobs at the same furious pace as in recent months. Construction employers cut 59,000 jobs, compared with 108,000 in April. Also the leisure and hospitality sector, which had been shedding jobs, recorded a small gain of 3,000 positions. The pace of job declines slowed among retailers and among professional and business services.

Manufacturers, by contrast, continued slashing jobs aggressively, cutting another 156,000 jobs. They have slashed 1.6 million jobs in the last year.

The numbers do not include the full brunt of the bankruptcies of Chrysler and General Motors -- and the expected closure of many of their dealers in the months ahead. Auto dealers cut only 6,900 jobs in May, a number that analysts expect to soar as thousands of Chrysler and GM dealerships are closed down.

That is one reason, economists say, that it is hard to forecast how long it will take for employment to turn around and start rising.

Yesterday's report "is very consistent with all the other evidence we're seeing that the recession is troughing right now," said Neal Soss, chief economist at Credit Suisse. "The question now is what kind of recovery we can expect, and there are a lot of mixed signals."

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