Jobless rate at highest level in 26 years

By Patrice Hill
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The nation's unemployment rate surged to a 26-year high of 9.7 percent last month as employers slashed jobs in nearly every part of the economy, the Labor Department reported Friday.

The news heralds what is likely to be a long, "jobless" recovery for the economy. Analysts believe the economy this summer started to emerge from the steep recession that started in December 2007, but say improvement in the job market is following the pattern of other recent recessions and lagging behind the return of growth in other sectors, such as manufacturing.

The job cuts since last summer have been the deepest seen in modern times, and have left the nation with nearly 7 million fewer jobs than before the recession, the department said. But the 216,000 jobs eliminated during August were the fewest in a year and fewer than the 276,000 jobs cut in July, indicating that the pace of layoffs continues to slowly moderate from a peak of 700,000 a month at the beginning of the year.

"Job losses are diminishing as the labor market creeps ever so slowly toward stabilization," said Bernard Baumohl, chief global economist at the Economic Outlook Group. "But employment conditions are improving at such an agonizingly slow pace that most Americans will not be able to detect any genuine improvement. That's why consumer spending will remain weak for the balance of the year."

Even though a recovery likely has begun, "if history is any guide, we will continue to see payrolls decline for at least another six months," he said. After the last two recessions, it took more than two years for the economy to generate enough jobs to bring down the unemployment rate.

"Companies just do not commence hiring once a recession ends, in part because it is so difficult to know with confidence that the economy has turned the corner for good," Mr. Baumohl said. "As a result, employers ask their existing workers to produce more" to get by for a while, and later they will add temporary workers until they are sure a recovery has taken hold and they can add full-time staff, he said.

Incomes have taken a hit along with jobs. Average hourly wages grew modestly by 0.3 percent in August, but weekly earnings were up by less than 1 percent over the past year because employers have been slashing hours as well as jobs in their efforts to cut costs and stay afloat.

Every major sector lost jobs during the month except education and health care, where jobs have kept growing since the onset of the recession. Even the government, which managed to create a few jobs in past months, slashed jobs by 18,000 in August, reflecting the lagging effect of tax revenues lost to the recession.

While state and local governments, faced with escalating budget gaps, are expected to continue trimming jobs, the federal government is becoming a rare source of job growth as it gears up to carry out massive stimulus, homeland-security, bank-bailout and other programs.

With baby boom-era government workers moving toward retirement, a survey by the Partnership for Public Service estimates that the government will need to fill 273,000 mission-critical jobs in the next three years, a 41 percent increase from the group's 2007 survey of job openings.

"Job opportunities are there. People need to seize them," said Max Stier, president of the partnership. "For job-seekers motivated by a desire to make a difference and improve the lives of Americans, there are no better possibilities than those provided by our federal government."

Unemployment rose among all groups in August but hit teenagers particularly hard. More than one in four teens who are looking for work have been unable to find jobs - a record, according to the department's survey of 60,000 U.S. households.

One reason the unemployment rate jumped to 9.7 percent from 9.4 percent in July was the fact that 73,000 people entered the market looking for work but were unable to find jobs, the department said.

In a broader measure of the job malaise facing most Americans, a measure of unemployment that includes workers who are too discouraged to keep looking for jobs and those working part time who would rather have full-time jobs rose to a record 16.8 percent from 16.3 percent in July.

In a sign of the depth of the employment distress, one in every three workers looking for jobs has been unemployed for more than six months.

John Silvia, chief economist at Wells Fargo Securities, said that is a hint that layoffs in the past year have been permanent rather than temporary. The hardship for workers with no prospect of being rehired by their previous employers is increased by the fact that the struggling housing market has made it more difficult to move elsewhere to find work, he said.