Widespread job losses a grim signal
With the government reporting the third straight month of job losses Friday and wages lagging behind inflation, the problems that originally centered on housing and financial markets now appear to have spread through almost every segment of the economy.
The unemployment rate hit 5.1% in March, up from 4.8% in February and the highest level since the wholesale job losses that followed Hurricane Katrina in September 2005. Employers reported that nonfarm payrolls shrank by 80,000 jobs, the sharpest drop in five years.
The combination of contracting payrolls and stagnating wages -- on top of falling home values and tighter credit -- makes an economic downturn almost certain, economists said, because consumer spending accounts for 70% of the nation’s gross domestic product. It also raises the possibility that recovery could be slow and difficult.
“With the consumer’s only source of support for spending coming from job-related income growth, a rapidly weakening labor market is the worst possible news for the economy,” Joshua Shapiro, chief U.S. economist for MFR Inc. in New York, wrote in an e-mail to the forecasting firm’s clients.
“Until government checks start flowing sometime in May, the consumer is going to be a major handicap for the economy,” he said, referring to rebates the government will issue to most taxpayers as part of an economic stimulus plan.
The scope of the job losses in March was more disturbing than the size of the decline, some said. Among the sectors hit were factories, construction companies, retailers, banks, real estate firms, mortgage brokers, hotels, airlines and architecture and engineering companies.
“It was a broad-based decline. It wasn’t just housing and Wall Street. The problems in the housing market have now affected the rest of the economy,” said Mark Zandi, chief economist for Moody’s Economy.com.
Last month’s losses followed declines of 76,000 jobs in both January and February for a total contraction of 232,000 jobs over three months.
Meanwhile, average hourly earnings rose 3.6% and monthly earnings 3.3% in the previous 12 months. Neither kept pace with the 4% consumer inflation rate.
All together, the Labor Department said, 914,000 workers have lost jobs in the last 12 months and 7.8 million are out of work. Just to keep pace with the normal rate of population growth, the economy needs to create more than 100,000 jobs a month, economists say.
“In a practical sense, there’s not really a debate any more that we are in a recession,” Zandi said. The term is commonly defined as two consecutive quarters of decline in the gross domestic product.
Some economists saw worrisome signs in the details of the government data. Alan Krueger, a former chief economist for the Labor Department who now teaches at Princeton University, noted that temporary jobs -- a harbinger of trends for working Americans as a whole -- fell off sharply in March, suggesting the labor market was unlikely to recover soon.
“Temporary help is one of the first places companies cut when things are bad and one of the first places they add when things begin to get better. But they are still cutting,” Krueger said. “This report strikes me as ominous.”
Susan Brock, 34, of Glendale lost her job as an administrative assistant in February after the insurance brokerage she worked for eliminated her position. Since then, she’s been going to the Verdugo Jobs Center in Glendale almost every day to use the free computers to search for jobs online and send out resumes.
“I’ve been applying for tons and tons and tons of jobs, but it’s been very difficult,” she said. “I haven’t even gotten a job interview yet.”
Brock received severance pay and unemployment checks and cashed out her vacation time but has had to dip into her savings to get by.
“I’m definitely strained,” she said. “There’s so many people in L.A. looking for work. There’s too many people and not enough jobs.”
Politicians seized on Friday’s news, with Democrats blaming Republicans for not doing enough to forestall an economic slowdown and Republicans warning that the Democrats would do even worse if they won the White House in November.
On Capitol Hill, Democrats argued that Congress should work quickly to extend unemployment benefits as part of a second stimulus package. A proposed extension was stripped from the stimulus legislation passed in January.
“If anyone still doubts the need to act swiftly and decisively to reverse the impact of Bush Republicans’ economic policies, look no further than today’s unemployment numbers that show the third straight month of job losses for American workers and businesses,” said Senate Majority Leader Harry Reid of Nevada. “This distressing trend tells us everything we need to know about the dangers of Republicans’ wait-and-see approach to the economy.”
On the campaign trail, presidential candidate Sen. John McCain (R-Ariz.) called the rise in unemployment “a stark reminder of the economic challenges confronting families today,” but he warned voters against what he called the Democrats’ “anti-growth agenda.”
President Bush, out of the country attending a NATO summit, did not comment on the report. But the White House issued a statement seeking to put the news in a favorable light, noting that a 5.1% unemployment rate is “below the averages for the past three decades.”
But Krueger said that comparison was misleading because the population has aged over that time and more people have retired. With a shrinking workforce -- falling from more than 64% of the population to 62% since the late 1990s, he noted -- a rising unemployment rate is a dismal sign.
“The consequences of unemployment are now more severe” than in the past, Krueger said. “The amount of time it takes to find a new job is longer because the demands of employers are changing. We have a mismatch between worker skills and available jobs, and it takes workers a while to understand that you can’t qualify for the same kind of job you had before.”
Nellie Skeen, 42, was laid off from her job as a program coordinator for a Los Angeles nonprofit organization in July. She had worked there 15 years. “It was a rude awakening, having to suddenly start looking for jobs again,” she said.
Skeen, who had been living in Compton, moved in with an aunt in Long Beach because she could no longer afford her rent. She was making daily trips to the Compton Career Link center, she said, but with the price of gas rising she now goes once a week.
Her car payments are long overdue, as are her auto insurance bills. She can’t pay for a phone, so she asks recruiters to contact her by e-mail.
“I’m dodging bullets, but what can I do? I have to look for work,” Skeen said. “But it’s hard. I’ve almost lost everything.”
Times staff writers Andrea Chang and Tiffany Hsu in Los Angeles and Maeve Reston with the McCain campaign contributed to this report.