- The Washington Times - Friday, October 2, 2009

UPDATED:

The Labor Department reported Friday the U.S. unemployment rate reached a 26-year high of 9.8 percent in September as the economy shed another 263,000 jobs, a sign the economy remains depressed despite hopes for a recovery.

The steady drumbeat of job losses each month brings the total since the recession started to 7.2 million. The job cuts last month were in nearly every industry, from manufacturing to retail trade. However, the rate losses has slowed by about half since the beginning of the year.

“It’s hard times,” said John Silvia, chief economist at Wells Fargo Securities, who called the drop in average wage gains during the recession and the increase in the number of permanently laid off workers “unnerving.”

Mr. Silvia said the depressed conditions in the job market will hold back the economic recovery and prevent consumers from taking the leading role they usually have during economic expansions.

A pick-up in home construction helped hold the loss of construction jobs to 64,000 in September, though job cuts were on the increase in commercial building, which has been hit hard by the credit crisis in recent months.

Manufacturing job losses also slowed to 51,000, about half the rate seen through June when two major auto companies were in bankruptcy and shut down their plants.

Government job losses resumed after a brief respite this summer, with 53,000 positions eliminated mostly in local government outside education, the department said.

The job market remains so bleak that 571,000 people dropped out and stopped looking for work, keeping the unemployment rate from rising even more than it did. The biggest increases in unemployment were among the most disadvantaged groups: teenagers and blacks. More than one in four teens is unemployed while more than 15 percent of blacks have been unable to find work.

In addition, the Commerce Department reported Friday that U.S. factory orders fell in August following four consecutive monthly increases.

New orders for manufactured goods deceased 0.8 percent, much worse than analysts’ expectation of a 0.7 percent increase. The decline was the result of a decrease in demand of transportation equipment, the agency said.

U.S. markets posted losses late Friday trading, following the release of the two government reports.

The Dow Jones Industrial Average was down 7.55 points, to 9,501.73, shortly before noon. The broader Standard & Poor’s 500-stocks Index was down 3.14 percent, to 1,026.71, and the tech-heavy Nasdaq was down 4.70 percent, to 2,052.48. The markets lost more than 2 percent Thursday in the biggest selloff since July.

Most economists think growth returned to the economy last month, but there is little sign of that in the job market. The rate of job losses actually accelerated in September, from 201,000 in August. The average rate of job losses has been 307,000 a month since May, compared to 645,000 during the worst part of the recession, from November to April, the department said.

Employers continued to cut hours as well as jobs last month, with the average work-week declining a tenth of an hour to 33 hours. Average wage gains have fallen steeply during the recession, to 2.5 percent over the last year.

President Obama, upon returning from Copenhagen, said the country “certainly has made some process” in recovering from the recession “but today’s report is a sober reminder that progress come in fits and starts.”

Even if the economy starting to grow again, it has a long way to go before generating enough jobs to bring unemployment down, said Peter Morici, a business professor at the University of Maryland.

Employers are driving a major increase in productivity by forcing their remaining staff to work harder. And with the population growing steadily, that means economic growth would have to exceed 3 percent on average to draw down the unemployment rate, he said.

The job losses are significantly worse than expected on Wall Street and are likely to contribute to a recent downward trend in the stock market, said Steven Englander, analyst with Barclays Capital.

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