Jobless rate hits 8.9% but losses slow
The pace of job losses slowed considerably during the month of April, adding to hopes that the nation’s steep economic downturn may be nearing a bottom.
Employers cut 539,000 jobs last month, the fewest in six months and significantly fewer than the 699,000 jobs that had been lost the previous month, the U.S. Labor Department reported Friday.
Still, the job market for Americans is difficult and getting worse. The nation’s unemployment rate climbed to 8.9% in April, the highest since 1983 and up from 8.5% the previous month.
“We pulled the cord and the parachute was packed. We’re still falling, but we’re not in free fall anymore,” said Diane Swonk, chief economist for Chicago-based Mesirow Financial.
The employment situation in April was better than expected -- most economists had predicted payrolls would drop by about 620,000 -- and was one of several glimmers of hope that had recently appeared after months of unrelenting dark news on the economy.
Gross domestic product figures released last week showed consumer spending rebounding during the first three months of the year after two consecutive quarters of steep declines. The Conference Board’s consumer confidence index surged in April, its second monthly rise in a row, after a nearly uninterrupted decline since August 2007. Pending home sales rose in March, also for the second straight month.
So-called stress tests of the nation’s largest banks issued by the Federal Reserve this week showed that most were returning to health. That’s an encouraging sign for the battered financial system, whose soundness is key to a revival of the larger economy.
The employment news bolstered burgeoning hopes among investors that the worst of the recession was over. The Dow Jones industrial average soared 164.80 points, or 2%, on Friday to 8,574.65.
Since hitting 12-year lows March 9, major stock indexes have rallied; the Standard & Poor’s 500 index is up 37.4% while the Dow has gained 31%.
Federal Reserve Chairman Ben S. Bernanke gave one of the most optimistic forecasts earlier this week, saying the economy may begin to grow again before the end of the year -- although he acknowledged that job losses could continue into next year.
The economy is likely to receive further support in the months ahead as the Obama administration’s $787-billion stimulus package flows into the economy, said Gus Faucher, director of macroeconomics for Moody’s Economy.com.
The biggest effect of the stimulus so far has been a psychological one, lifting the spirits of consumers, Faucher said. But he noted that more money would flow into the economy when senior citizens get a one-time $250 bonus in their Social Security payments this month and contractors for infrastructure projects hire more workers in the coming months.
Still, the economy faces plenty of risks, most prominently a debilitating shock if General Motors Corp. goes into a disorderly bankruptcy or another major financial institution reaches the brink of failure, Faucher said.
“We’re establishing the conditions for a rebound. I wouldn’t say it’s happening yet,” he said.
President Obama called the jobs report an encouraging sign that the economy was nearing a turnaround. But he said it reflected a “sobering toll” of job losses.
Obama used the occasion to unveil plans to help displaced workers get more education and training while still keeping their unemployment benefits.
Federal law currently requires states to allow people who receive unemployment benefits to get training, but in defining “training,” some states rule out long-term programs or those for workers already possessing some marketable skill.
The president is asking states to change those policies for the remainder of the economic downturn, so that people can continue to collect unemployment benefits while working on vocational programs or two- and four-year degrees.
At the People Connection, a San Francisco employment agency, staffers said they began to see signs this month of a renewed interest among employers in hiring temporary workers, usually one of the first areas to turn around during a recession.
“In the last few weeks, we’ve seen a slight hint of an upturn,” said Sonja Stokes, a staffing consultant at the employment agency.
“We’re getting more calls from clients who need vacation coverage. We also have a few direct-hire [permanent] positions, which is a good sign.”
Still, analysts said that regardless of whether the economy hits bottom soon, the job market is likely to remain tough for months to come. Employers typically are hesitant to hire new full-time workers in the early stages of a recovery and usually continue layoffs to cut costs.
Many economists expect the unemployment rate to rise for the remainder of the year and exceed 10% before it begins to decline.
Despite a boost from infrastructure projects in the stimulus package, the construction industry is expected to continue to contract in the months ahead as existing commercial projects wind down, said Swonk, the Mesirow Financial economist. The road and bridge projects that the government is financing are unlikely to make up for the slowdown in construction of office buildings, shopping malls, factories and apartment complexes.
The monthly Labor Department report highlighted the toll that the longest recession since World War II has taken in dashed dreams and disrupted lives, with a total of 5.7 million jobs lost since the recession started in December 2007.
The job market in April was assisted in part by a burst in government hiring, with 72,000 more public-sector jobs added during the month. The U.S. Census Bureau hired 140,000 temporary workers last month to begin preparations for the once-every-decade national population count.
Still, in a sign of the tight job market, the Census Bureau received more than 1 million applicants for those positions, many of them from out-of-work professionals.
“A lot of times, we get seniors and college students looking for intermittent employment,” said Stephen Buckner, a Census Bureau spokesman. “This time we had a highly qualified pool that included not only a lot of college graduates but many graduate professional management personnel.”
The job losses in April were pervasive, covering most private-sector industries.
If “discouraged workers” who have given up looking for a new job and part-time workers unable to find full-time jobs are included, the unemployment rate in April would have been 15.8%, the highest level since the government began compiling the more comprehensive indicator in 1994.
Christi Parsons in Washington and Walter Hamilton in New York contributed to this report.