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Jahaira
Perez, right, and Takela Lawrence, second from right, both of
Providence, R.I., examine job listings at a state managed
employment center, in Providence on Thursday. Perez is
unemployed after being laid off in May of 2009 from her job as a
cashier at a supermarket, while Lawrence is looking for a second
job as a school crossing guard. The unemployment rate has
surpassed 10 percent for the first time since 1983 and is
likely to go higher.
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WASHINGTON - Just when
it was beginning to look a little better, the economy relapsed Friday
with a return to double-digit unemployment for only the second time
since World War II and warnings that next year will be even worse than
previously thought.
The jobless rate
rocketed to 10.2 percent in October, the highest since early 1983,
dealing a psychological blow to Americans as they prepare holiday
shopping lists. It was another worse-than-expected report casting a
shadow over the struggling recovery.
President Barack Obama
called it "a sobering number that underscores the economic
challenges that lie ahead." He signed a measure to extend
unemployment benefits and to expand a tax credit for homebuyers.
Economists had not
expected the 10 percent mark to come so quickly and immediately darkened
their forecasts. Mark Zandi, chief economist at Moody's Economy.com, and
Joshua Shapiro, chief U.S. economist at MFR Inc., predicted the rate
will peak at 11 percent by mid-2010. They earlier had projected 10.5
percent.
Unemployment at 11
percent would be a post-World War II record. Only once since then has
joblessness hit double digits in the United States — from September
1982 to July 1983, topping out at 10.8 percent.
"It's not a good
report," said Dan Greenhaus, chief economic strategist for New
York-based investment firm Miller Tabak & Co. "What we're
seeing is a validation of the idea that a jobless recovery is perfectly
on track."
The Labor Department,
using a survey of company payrolls, said the economy shed 190,000 jobs
in October. A separate survey of households found 558,000 more people
were unemployed last month than in September. Some 15.7 million
Americans are out of work.
The survey of companies
doesn't count the self-employed and undercounts employees of small
businesses. So the economic picture could be even more dire.
One struggling small
business, homebuilder Miller and Smith Inc. of McLean, Va., has trimmed
its work force to about 100 from 350 at the height of the housing market
in 2005. The company has been hurt by a slowdown in building and surging
health care costs.
Troubles for small
businesses could have a disproportionate effect on the economy, because
they account for about 60 percent of the nation's jobs. They tend to
rely on credit cards and home equity lines — both of which banks have
tightened — for cash flow.
And the unemployment
rate doesn't include people without jobs who have stopped looking, or
those who have settled for part-time jobs. Counting those people, the
unemployment rate would be 17.5 percent, the highest since at least
1994.
Economists had expected
unemployment to rise to no more than 9.9 percent, up just a tick from
September's 9.8 percent, and the surprising jump added to fears that the
recovery could fizzle if Americans don't spend.
Already, consumer
confidence for October came in well below what analysts were expecting.
Shoppers' sentiments about the state of the economy are the gloomiest in
nearly three decades.
Stores, always with an
eye on holiday sales, are especially worried this year.
"This is a
situation where the recovery balloon is getting off the ground but might
not have enough power to keep rising," said Brian Bethune,
economist at IHS Global Insight.
Sitting at a St. Louis
unemployment center, Paul Branyon, who was laid off in July from a
Williams-Sonoma factory in Tennessee and now lives with relatives, shook
his head and laughed at the notion that the recession is over.
"It's getting
actually harder right now," the 26-year-old said. "It seems
like everywhere you go, people are losing jobs. People are cutting back.
So it's going to get harder before it gets easier."
The economy actually
grew from July to September for the first time in a year, but that's no
consolation for people like Jose Betancourt, 57, who goes to a
Miami-area career center twice a week to take computer education
classes.
Betancourt has been out
of work since July, when he was laid off from his supermarket
maintenance job. He lives on about $600 a month in unemployment
benefits, barely enough for the rent for his efficiency apartment, food
and utilities.
He has trouble
believing the recession is over. In his neighborhood, he sees other
jobless people and empty stores.
"It's as if they
just gave the economy a nice coat of varnish to make everyone feel
better," he said. "I'm in a state of anxiety, and I see it all
around Miami."
The worst recession
since the 1930s may be over, but the recovery isn't expected to be
strong enough to stem job losses and get businesses hiring again. And
the unemployed are staying out of work longer. The count of people
jobless for six months or longer stands at a record 5.6 million.
As for employers, few
are confident enough in the recovery to hire. Art McKeen, plant manager
of the Baldor Electric Co. factory in suburban St. Louis, says the plant
has no plans add workers any time soon.
Baldor cut back
production last year and put workers on part-time hours rather than lay
them off. Orders have picked up again, but not enough to justify hiring.
"We don't have the need for them right now," McKeen said.
Prospects that the
government might pass a second stimulus bill appear dim. Congress is
already grappling with sweeping health care legislation, raising
concerns about further swelling the federal deficit.
"More debt, more
spending ... clearly has not worked — particularly in a time of
double-digit unemployment," said Senate Republican leader Mitch
McConnell of Kentucky. Democrats said the economy would have been in
worse shape without the first stimulus.
October was the 22nd
straight month the U.S. economy has lost jobs, the longest on record
dating back 70 years. Losses at factories, construction companies,
retailers and financial services companies far outweighed gains in
education and health care, professional and business services and
elsewhere. Government payrolls were flat.
One faint sign of hope:
Temporary employment grew by 33,700 jobs, its third straight month of
gains after steep losses earlier this year. Employers are likely to add
temporary workers before hiring permanent ones.
Chris Rupkey, an
economist at the Bank of Tokyo-Mitsubishi, called the big jump in the
jobless rate "a kick in the stomach" and predicted a slog
ahead. It could take at least four years for the jobless rate to drop to
more normal levels of 5 or 6 percent.
"The last two
recoveries from recession in the '90s and 2001 were jobless, and this
one is clearly headed down the same road," he said.
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