Reuters
January 8, 2010
U.S. employers cut 85,000 jobs in December, confounding expectations the labor market was finally stabilizing and piling pressure on President Barack Obama to spur job growth.
Unemployment, which held steady at 10 percent, remains the Achilles heel of the economy’s recovery from its worst recession in 70 years. Creating jobs is critical to sustaining the recovery when government stimulus fades.
November payrolls were revised to show the economy actually added 4,000 jobs rather than losing 11,000, as initially reported, breaking a streak of 22 consecutive monthly losses, the Labor Department’s report on Friday showed.
With revisions to October, however, the economy lost 1,000 more jobs than previously estimated over the October-November period and the stable unemployment rate in December reflected a surprisingly large number of discouraged jobseekers leaving the labor force.
December’s payrolls plunge was much worse than what economists had expected. Wall Street had forecast a flat reading and a tick up in the unemployment rate to 10.1 percent.
Payrolls fell in the manufacturing, construction and the service-providing sectors. Government employment also dipped.
Still, analysts said the data suggested a broad trend toward a labor market recovery was intact.
“The economy continues to take three steps forward and two steps back. I wouldn’t read too much into it beyond the fact that this will be a slow employment recovery,” said David Katz, chief investment officer at Matrix Asset Advisors in New York.
U.S. stocks were marginally lower in early afternoon. Government bond prices rose and short-term interest rate futures pared losses as investors bet the weak labor market would keep inflation tame and encourage the Federal Reserve to leave interest rates near zero for a long time.
Two Federal Reserve officials said on Friday they would like to see the nation’s jobs picture improve before the U.S. central bank withdraws extraordinary support for the economy and markets.
In a separate report, the Commerce Department said wholesale inventories grew at the fastest rate in over five years in November and sales climbed strongly, implying businesses were preparing for a healthier economy.
Economic bellwether United Parcel Service Inc raised its fourth-quarter profit forecast on Friday, a step analysts said reflected improved shipping volume and economic recovery. However it will cut 1,800 jobs.
POLITICAL PRESSURES MOUNT
High unemployment is one of the toughest domestic challenges facing Obama. The administration’s success in getting people back to work will shape prospects for Obama’s political future.
Obama’s popularity has steadily fallen, knocking his approval ratings down to around 50 percent. This could dim the election prospects for his Democratic Party in the November congressional elections. Obama is scheduled to make a statement on the economy at 2:40 p.m.
“Today the President will have an opportunity to talk about tax credits and new efforts to try to jump-start again our economy,” U.S. Labor Secretary Hilda Solis told Reuters Television. “We’re not going to stop until we start adding jobs to this economy,” she added.
Republicans said the steep fall in payrolls last month was evidence Obama’s policies were not working.
The scourge of high unemployment is not only confined to the United States. Euro zone unemployment rate jumped to an 11-year high in November, and is likely to rise more in the coming year, data showed on Friday.
The U.S. economy shed 4.2 million jobs for the whole of 2009, according to the Labor Department’s survey of employers.
The department’s survey of households offered an even gloomier assessment of the job market, showing 661,000 people left the work force last month.
The report showed there were 929,000 “discouraged workers” who had given up looking for a job, up from 642,000 a year earlier. Chris Rupkey, an economist with Bank of Tokyo-Mitsubishi, called the rise in discouraged workers “a simply astonishing number that borders on the frightening.”
“If they were still looking for work and counted as the unemployed, the unemployment rate would have been 10.5 percent,” he said. “This clearly isn’t your father’s recession. It is looking more like your great-grandfather’s. Brother, can you spare a dime?”
The broadest measure of unemployment, which includes discouraged workers and those working part-time for economic reasons, rose to 17.3 percent from 17.2 percent in the prior month.
Still, the payrolls report, which is viewed by most economists as the more reliable gauge of the labor market’s health, showed pockets of strength.
Professional and business services added 50,000 positions, while education and health services increased payrolls by 35,000. Temporary help employment rose 47,000, continuing an upward trend that shows a reluctance among employers to hire full-time workers but suggests they may need to soon.
“Because staffing employment is a leading employment indicator, the consistent trend of temporary help job growth bodes well for overall job growth in the near future,” said Richard Wahlquist, president at the American Staffing Association in Alexandria, Virginia.
The average workweek was unchanged at 33.2 hours, while average hourly earnings edged up three cents to $18.80.
