U.S. job loss report is blow to still-fragile recovery

By Neil Irwin, Annie Gowen and Ben Pershing
Washington Post Staff Writer
Saturday, January 9, 2010; A01

The job market remained in a deep funk in December, according to a government report Friday showing that employers view the economic recovery as too weak and too fragile to begin hiring again on any large scale.

The pace of layoffs has slowed sharply in recent months, but businesses still cut 85,000 net jobs in December, the Labor Department said. The unemployment rate was unchanged at 10 percent, but economists suspect this is only because hundreds of thousands of frustrated workers stopped looking for jobs.

With the jobless rate stuck in double digits and Democrats worried that the weak economy will prompt voters to turn on them in fall elections, the White House plans more public events in coming weeks to underscore its concern about jobs and the economy. On Friday, President Obama called the employment report a setback during his announcement of $2.3 billion in tax credits to support renewable energy, which the administration says will create 17,000 jobs.

"The road to recovery is never straight," Obama said, "and we have to continue to work every single day to get our economy moving again."

Senate Democrats, meanwhile, have begun crafting a bill to encourage job creation, which Democratic aides said will likely focus on small business, infrastructure spending and "green" energy. The House passed a $154 billion jobs bill in December.

The report was not without bright spots; for instance, revised figures for November showed that the nation had actually added 4,000 jobs that month. It was the first month of job creation since December 2007.

But the overall numbers were fundamentally disappointing, defying forecasters who had expected the number of jobs to hold steady and undermining hopes that better times are near for American workers. Half a year after the economy resumed growing, the job market remains stuck in neutral.

"Businesses just aren't set to hire, yet," said Mark Vitner, senior economist at Wells Fargo. "They've spent the last two years shrinking their operations to survive, and they're largely done with that, but they aren't seeing much reason to expand their operations yet."

Employers slashed positions more dramatically in the past two years, squeezing more productivity out of remaining workers. That has led many analysts to expect a substantial increase in the number of jobs in the early months of 2010, as companies must hire again just to keep up with demand for their products.

That still may happen, though the new report showed the deep sense of caution that remains among employers.

"What we're seeing is slow, incremental progress," said Paul Villella, chief executive of HireStrategy, an employment services firm in Reston. "There is more activity, but nobody is saying, I need to hire someone tomorrow."

One positive sign was the addition of 46,500 temporary jobs. That may presage overall job growth in the months ahead, as companies bring on temps to help meet demand while waiting to see whether improved business conditions last.

Still, the continued weak job market has made for brutal conditions for those seeking work. The ranks of the long-term unemployed have soared, and 6.1 million Americans have now been unemployed for more than six months.

The unemployment rate held even in December, despite a rise in the number of people without jobs, because 661,000 dropped out of the labor market entirely. That means they were no longer counted as unemployed. As the economy improves, some of those people will likely return to the labor force, which could keep the unemployment rate elevated for many months to come.

"There's definitely a discouraged worker effect going on here," said Ethan Harris, head of North American economics at Bank of America-Merrill Lynch. "It's going to make it very hard to bring down the unemployment rate."

The difficulties facing job seekers mired in the worst labor market in a generation were on display Friday at the Arlington Employment Center, where every computer in the resource center was filled at lunchtime.

"We haven't seen a full-blown recovery," said Howard J. Feldstein, director of the center, where traffic is up 40 percent in the past six months. "There are still a lot of people coming here for services and employment."

Alexandra Deaza, 39, has been looking for a job in international relations since she relocated here from Wisconsin last year. She has had just a half-dozen interviews in six months and is receiving public assistance and food stamps.

"It's horrible," she said. "I am really desperate."

Sha'aron Ridley, 32, was on Craigslist looking at the latest postings. She has been looking for a full-time job since October 2008, and said she has been piecing together her $1,650 rent payment by working 16-hour days as a personal assistant and at nights as a telephone customer service representative.

"It's really, really bad out there," Ridley said. "I just try and work hard and hope for the best and that it's just a temporary situation."

Against that backdrop, the Obama administration and Congress are both searching for policies that might help create jobs, looking at approaches that are less costly than the $787 billion stimulus bill passed in February and more narrowly targeted at creating jobs than propping up overall economic activity.

The House passed a hastily-assembled $154 billion jobs package before recessing in December, but the Senate chose to wait. Now that chamber is preparing its own, likely more modest measure, with an eye toward putting it on the floor in February. Senators return to town Jan. 19, and are expected to vote quickly on raising the federal debt ceiling before turning to health care and then the jobs bill.

Senate Majority Whip Dick Durbin (D-Ill.) and Sen. Byron L. Dorgan (D-N.D.) have been tasked with assembling the jobs measure, and the two lawmakers have been paring a list of more than 100 ideas submitted by their colleagues. A Democratic aide, requesting anonymity because the discussions are preliminary, said the ideas fall into four categories: small business, infrastructure, green energy and the public sector.

A second Democratic aide said that infrastructure spending would likely be a major component of the package, but the aide said there was "small appetite" in the Senate for a package as large as the one that passed the House in December.

Staff writer Michael A. Fletcher contributed to this report.

View all comments that have been posted about this article.

© 2010 The Washington Post Company