With an additional 539,000 jobs lost last month, the unemployment rate is pushed to 8.9%, but the numbers are better than analysts expected
The U.S. economy shed another 539,000 jobs in April, sending the unemployment rate to 8.9%, the Labor Dept. reported on May 8. The loss is lower than in March, when it totaled 663,000 and pushed the unemployment rate to 8.5%, though most analysts still expect further deterioration for the labor market throughout 2009.
The report is better than the 620,000 jobs analysts had expected the economy would lose in April, although the unemployment rate topped the consensus expectation of a rise to 8.8%. From December 2007 through April 2009, the economy has now lost more than 5.6 million jobs.
Economists say that while the pace of job losses may be slowing, they will continue at least through the end of the year. Because unemployment is a lagging economic indicator, consumer confidence, business investment, and consumer spending typically recover ahead of the jobs market.
"What recovery we get will be tepid, and unemployment will continue to rise until it pierces 10%," says Peter Morici, a professor at the Robert H. Smith School of Business at the University of Maryland. He predicts an unemployment rate of 9.3% this year, and increasing from there in 2010.
Losses Will Continue
He adds that even if the economic contraction slows in the second and third quarters, job losses in the range of 500,000 appear likely for the next several months. Counting workers who have left the workforce and those who work part time but would prefer full-time jobs—under an alternate measure of unemployment labeled "U-6" in the report—unemployment was 15.8%, up slightly from 15.6% in March.
Other economists point to worrying signs in the report about consumer incomes: hourly wages rose only 0.1% in April. "Combined with the heavy loss of jobs, [that] signals a continuing decline in overall wage and salary incomes, which is bad news for purchasing power," says Nigel Gault, chief U.S. economist for IHS Global Insight, an economic forecasting firm. Gault says that while April's numbers mark a "shift in momentum," he expects job losses to continue throughout 2009, with unemployment peaking at 10%.
There's another reason not to grow overly optimistic about the jobs picture. April job cutting slowed, in part, because the federal government hired temporary workers to help conduct the 2010 Census. Those hires made up most of the 66,000 additions to federal payrolls over the past month.
Meanwhile, the private sector lost 611,000 jobs, with many major employment categories showing slower but still steep declines. In April, the finance and insurance industries shed 40,000 jobs. Since December 2007 those once-thriving industries have lost 283,000 jobs. Over the same period, the construction industry has lost 1.1 million jobs—with 110,000 more in April—and manufacturing 1.5 million jobs, with 149,000 in April. Another dim spot in April's jobs report is the retail jobs figures. In April, 47,000 jobs were lost, indicating that retail sales and consumer spending remain weak. The retail industry has lost 744,000 jobs since November 2007, with almost 150,000 of those in the past three months.
Other figures also point to long-term employment trouble. In April, 27% of the jobless were out of work for more than six months, surpassing the previous recession peak of 19.8% in November 1982. The long-term unemployed could reach 30% of all jobless workers by 2010, according to a report released on May 6 by the National Employment Law Project and the Institute for Research on Labor & Employment.
"The swelling ranks of the long-term unemployed is one of the most alarming features of this recession," says Sylvia Allegretto, an economist at the University of California at Berkeley and a co-author of the report. "Long-term unemployment usually peaks after the official end of the recession, but with levels already this high, long-term joblessness is already a major problem, and is only going to get worse."