In Jobless Rate Dip, a Partial Picture

Monthly change in non-farm employment
By Neil Irwin and Annys Shin
Washington Post Staff Writers
Saturday, August 8, 2009

Unemployment dipped in July for the first time in 15 months, but the jobs data released Friday also brought into focus the limits of the budding economic recovery.

The new numbers raised hopes that the recession could be nearing an end. The unemployment rate fell to 9.4 percent, from 9.5 percent in June, and employers slashed 247,000 jobs, the slowest rate of decline in nearly a year.

For all the optimism in Washington and on Wall Street -- President Obama said the economy is "pointed in the right direction," and the stock market rose 1.3 percent -- some details in the report show that the labor market remains weak. The stabilization in the economy is not rippling through to ordinary American workers. Economists generally expect the unemployment rate to resume its rise in the coming months, ultimately reaching or surpassing 10 percent.

The July decline in the jobless rate came about not because more people had jobs, but because 422,000 people removed themselves from the labor force, essentially giving up the search for work. The number of long-term unemployed people -- those who have been out of a job but looking for more than 26 weeks -- rose by another 584,000.

"There's nothing really happening right now," said Marc Patterson, 31, a Southeast Washington resident unemployed for seven months who had little luck finding work as a janitor. "There aren't too many jobs."

And the number of jobs with employment services companies continued declining in July. Increases in that number tend to forecast broader gains in employment as companies reluctant to hire permanent employees bring on temps to handle rising demand.

"If we don't see temp jobs go positive by September or October, in my mind, that would indicate we've got a longer way to go," said Roy G. Krause, chief executive of Spherion, a large employment services firm. His own company saw modest growth in demand for workers in the second quarter, he said, as "some employers have cut back a little bit too much and therefore they're starting to add a few people."

The ongoing weakness in the job market is the key factor leaning against a robust recovery. The unemployment rate almost always lags at the end of recessions -- sometimes by long periods of time -- and many economists expect the unemployment rate to resume rising in the months ahead.

That is because as companies stop laying off workers in massive numbers, moderating the rate of job losses, those who have given up looking for work may re-enter the labor force -- a major risk to an otherwise improving outlook.

"We're still headed pretty quickly to 10 percent unemployment," said Lawrence Mishel, president of the Economic Policy Institute, a liberal-leaning think tank. "Unemployment will be rising for the next year or more."

And while the rate of job loss in July was slower than economists forecast, it still represents what is, by conventional measures, a very rapid contraction. Employers need to create around 150,000 jobs a month just to keep up with population growth, so it would take a major reversal for conditions to improve.

"We're stabilizing the patient, but the patient is still sick," Labor Secretary Hilda L. Solis acknowledged in a conference call with reporters Friday.

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