The much-hoped-for economic recovery was a no-show in last month’s job market. More than a quarter-million layoffs sent the unemployment rate close to 10 percent.
Continuing a yearlong trend, September’s 263,000 job cuts were in nearly every industry, from manufacturing to retail trade, and were close to the 300,000 job-loss average for each month since May. While that average is down from the bloodletting of 645,000 per month seen from November to April, it’s still far too many job losses to support a lasting economic recovery, economists said.
“This report lessens hope for a sustainable recovery,” said Harm Bandholz, economist at Unicredit Markets. “The U.S. labor market remains the Achilles heel of the U.S. economy. Not only did the pace of job losses accelerate again, but the weakness remained broad-based.”
The rise in the unemployment rate to 9.8 percent from 9.7 percent in August would have been much higher - to more than 10 percent - if more than a half-million discouraged job hunters hadn’t dropped out of the labor market, he said.
In a measure of how deep and painful the recession has been for those without jobs, the average length of unemployment reached a record high of 26.2 weeks. The broadest measure of unemployment, which includes people too discouraged to look for work and people working part time who would rather have full-time jobs, also rose to a record high of 17 percent.
September’s 263,000 job-loss figure was up from 201,000 in August and brought the number of jobs destroyed by the recession close to 8 million, the Labor Department said in a monthly jobs report Friday that included sharp downward revisions in employment in previous months.
Sung Won Sohn, economics professor at the University of California Channel Islands, said the steady drumbeat of job losses raises the odds that the economy will fall back into a “double-dip” recession after experiencing a period of growth in the second half of the year.
“This report is dismal and disappointing. The ‘green shoots’ in the economy are withering,” he said. “Technically, the economy may have bottomed, but the job market is lagging behind and struggling.”
Signs are that employers will not increase hiring for the critical upcoming holiday season, when about a quarter of all retail sales are made in the United States, he said. Businesses are afraid to hire until they are sure of a sustained recovery.
“This type of fear could undermine the budding economic recovery” because it is self-fulfilling, Mr. Sohn said.
There is more hope for manufacturing and construction workers - industries in which the pace of layoffs has slackened in recent months, he said. Inventories of cars and other manufactured goods are now so low that manufacturers have to step up production, while construction will be a primary beneficiary of President Obama’s $787 billion stimulus program in coming months, he said.
William C. Dunkelberg, chief economist at the National Federation of Independent Business, said small businesses are nowhere close to being able to hire people, as they have gone into survival mode since the recession started in December 2007.
“Job losses are unusually heavy among the smallest employers, who are struggling to reduce costs and survive the longest recession since the 1930s,” he said. “Retail sales are rising … but not enough to trigger the hiring of additional employees.”
The jobs report and other recent economic reports showing that the budding recovery may be stalling has undermined optimism in financial markets, where many investors were betting that the economy would show a strong rebound in the second half of the year. That optimism had propelled a more than 50 percent gain in major stock indexes since March, but the market recently has retraced some of those gains.
“The steady improvement in the labor market - from horrendous, to horrible, to awful, to bad - over the last eight months seems to have stalled out at ‘bad’ in September,” said John Canally, economist at LPL Financial, where strategists had been calling for further gains in stocks. “This calls into question our forecast that the economy will begin to generate job growth by year end.”
Not only was the number of jobs slashed in September far larger than the 175,000 anticipated in the markets, but “leading indicators” in the report also were down across the board, he said. That included a decline in the workweek to a record low of 33 hours - indicating that businesses do not expect a pickup in demand anytime soon.
“It’s hard times,” said John Silvia, chief economist at Wells Fargo Securities, who called “unnerving” the drop in average wage gains to 2.5 percent in the past year and increase in the number of permanently laid-off workers.
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, he said.
The biggest increases in unemployment were among the most disadvantaged groups: teenagers and blacks. More than one in four teens are unemployed, while more than 15 percent of blacks have been unable to find work.
Another area that had been a source of shelter for job seekers earlier this year - government employment - unraveled last month, with 53,000 positions eliminated, mostly in local government, the jobs report showed.