- The Washington Times - Saturday, August 8, 2009

The nation’s unemployment rate unexpectedly dipped to 9.4 percent last month as businesses laid off fewer workers, in a strong sign the grip of the worst recession in modern times is loosening, the Labor Department reported Friday.

Fewer than 250,000 jobs were eliminated during the month - more than halving the 645,000 average of monthly job losses during the deepest phase of the recession between November and April, the department said.

The slight easing of the unemployment rate from 9.5 percent in June was surprisingly good news, as many economists had predicted the jobless rate would keep climbing. But it mostly reflected the mass exodus of 422,000 workers from the labor force, meaning fewer people were looking for work, and probably because they were discouraged about finding jobs.

The White House heralded the improving job news while Wall Street celebrated by sending major stock indexes to their best levels of the year. The Standard & Poor’s 500 index sailed back through the 1,000 level to 1,010, while the Dow Jones Industrial Average jumped 114 points to 9,370.

“The U.S. labor market is on the mend,” said Harm Bandholz, economist at Unicredit Markets. “The pace of layoffs has slowed down noticeably.”

“The dawn of an economic recovery is here,” said Sung Won Sohn, economics professor at California State University Channel Islands. “The sharp contraction in employment has moderated, pointing to the end of the recession.”

President Obama offered tempered enthusiasm for the improving economy, mindful that many of the 6.7 million workers laid off in the recession remain unable to find jobs and have felt little improvement in their financial situations.

“The worst may be behind us,” he said. “Today, we’re pointed in the right direction. … We have a lot further to go. As far as I’m concerned, we will not have a true recovery until we stop losing jobs.”

The president suggested the White House’s bank bailout program and other policies aimed at shoring up the shattered financial system helped to produce the improvement in the economy and job market - a point also made by the current and former Federal Reserve chairmen and many economists.

“We’ve pulled the financial system back from the brink,” he said. “I am convinced that we can see the light at the end of the tunnel.”

But the White House, like many economists, still expects the unemployment rate to rise to 10 percent or more in coming months despite the slight improvement in July.

That is because many of the workers who have temporarily dropped out of the job market this summer are likely to re-enter in the fall in hopes of having better luck at finding jobs, economists said.

There was little evidence that jobs would become much easier to find in Friday’s jobs report. While layoffs were waning to 247,000 in July, jobs continued to be shed from nearly every major industry, including manufacturing, construction, finance, retailing, transportation and business services.

As in past months, health care was the only top industry still hiring, posting 20,000 new job openings.

Government jobs inched up by 7,000, most likely reflecting the growing impact of the $787 billion economic stimulus bill. But formerly strong growth in education jobs came to a standstill.

Leisure and hospitality jobs increased by 9,000, but the department said that was not a significant change.

Other parts of the report offered modest signs that the economy was slowly improving after an unprecedented spate of gigantic job losses over the winter. The department said 43,000 fewer jobs were lost in May and June than previously reported.

Also, total hours worked economywide did not fall for the first time in months, and the average workweek rose by one-tenth of an hour from a record low of 33 hours in June. The manufacturing workweek increased more robustly by three-tenths of an hour, reflecting the return to work of many employees at idled auto plants.

Reduced job losses in manufacturing also were the result of fewer autoworkers being laid off, but that was largely because the manufacturers already carried out drastic cutbacks in staff earlier this year during the months General Motors and Chrysler were in bankruptcy and not producing any cars.

“There is far less improvement than meets the eye” in the jobs report, said Mark Vitner, senior economist at Wells Fargo Securities. “Job losses remain remarkably broad-based, with just 30 percent of 271 industries adding to their payrolls during the month.”

“Even the improvement in the unemployment rate is suspect,” and may have been caused by temporarily unemployed autoworkers returning to their jobs, he said.

For the long-term unemployed, the news was particularly dreary. The average duration of unemployment rose to a record 25.1 weeks, suggesting many are struggling to make headway in their search for new jobs.

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