- The Washington Times - Saturday, January 5, 2002

The nation's unemployment rate rose to 5.8 percent last month as retailers, airlines, manufacturers and other businesses cut 124,000 jobs bringing the job loss since the recession began to 1.4 million.
While the pace of job cuts seen in yesterday's Labor Department report was lower than the torrent seen after the September 11 terrorist attacks, it brought to a close the worst year for unemployment in nearly two decades. The joblessness rate started out the year at 4 percent, and economists say it could go as high as 7 percent this year as layoffs continue.
The businesses that shed jobs last month were among the hardest hit by the recession and the September 11 terrorist attacks. Manufacturers eliminated 133,000 jobs, retailers laid off 77,000 workers amid the poorest Christmas sales season in more than a decade, and temporary jobs declined by 55,000.
But the report showed a couple of bright spots as well. Health care providers added 31,000 positions, and a binge of hiring by state and local governments helped to keep net job losses down. The 55,000 workers they hired were mostly in education, while employment in private education also soared by 28,000.
State and local governments are increasingly strapped by a recession-induced fall in revenues, however, and they are not likely to keep up their record pace of hiring this year, analysts say.
Labor Secretary Elaine L. Chao took heart from the first increase in service jobs since the terrorist attacks, fueled by the need for workers in health care, education, security and other government services.
"There are some helpful signs that we could be bottoming out," she said, noting the slower pace of job losses. The department has been issuing grants to help dislocated workers acquire the skills they need to find jobs in growing fields.
While many economists hope that a recovery will take shape in the first half of the year, most expect job losses to continue and unemployment to keep rising for months as businesses continue to pare costs and excess capacity.
Workers learned during the 1990-91 recession that unemployment can be a problem long after the recession is officially over, as a period of "jobless recovery" can follow for as long as two years.
Because of widespread hiring freezes in addition to the cuts, not enough jobs are being created to accommodate about 100,000 new workers including immigrants and college graduates who enter the labor force for the first time each month.
As a result, the number of people who reported being unemployed last year increased by 2.6 million to 8.3 million, even though businesses reported cutting only a little more than a million jobs.
"The recession will continue to batter working people well into next year and the unemployment crisis is certain to linger for even longer," said John J. Sweeney, president of the AFL-CIO. He called for an extension of unemployment benefits for those who have been without work for more than six months, similar to the extensions Congress passed in previous recessions.
Congress and President Bush failed to agree last month on an economic stimulus package that included an extension of benefits. The labor federation calculates that 768,000 workers exhausted their unemployment benefits between September and December.
While unemployment is rapidly becoming a serious economic and political problem, it remains low compared with previous recessions, said Charles I. Plosser, economics professor at the University of Rochester.
Unemployment peaked at 7.8 percent a full year after the last recession was over, and hit 10.8 percent during the 1981-82 recession.
"Recessions are often associated with much more dramatic increases in unemployment," he said. "Moreover, even at 6 percent, our unemployment rate is well below the average rate in Europe" and most of the rest of the world, he added.
The relatively low level of joblessness, combined with the lowest interest rates in a generation and very low inflation, explains why consumers so far have not completely given up hope during this recession, he said.
"The economy is still doing remarkably well and has absorbed some tremendous shocks," he said. "While it may get a little worse before it gets better, this will go down in history as one of the mildest recessions in U.S. history."


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