Few jobs as jobless rate rises to 9.89%

The United States added a total of just 39,000 jobs last month, down from an upwardly revised gain of 1,72,000 in October, the Labour Department reported on Friday. With local governments shedding jobs, the additions in the private sector were too small to reduce the ranks of the unemployed or even to keep pace with people entering the work force.

The unemployment rate, which is based on a separate survey of households, rose to 9.8 per cent in November. It was the highest jobless rate since April and up from 9.6 percent in October.

The outlook remains bleak. More than 15 million people are out of work, among them 6.3 million who have been jobless for six months or longer. Many are about to exhaust their unemployment benefits, which have been extended repeatedly by the government because of the severity of the downturn.

The latest snapshot of the labor market cast a pall over what had been a brightening picture of a steadying economy. In recent weeks, the average number of people applying for unemployment benefits has generally declined. Pending home sales topped forecasts in October, while last month retail sales posted one of the biggest increases in years.

The anaemic job figures could lend support to the Obama administration’s call to extend unemployment benefits as well as to recent efforts by Ben S Bernanke, the Federal Reserve chairman, to continue to stimulate the economy.

Plodding economic growth, however, seems insufficient to persuade businesses to hire.

“Obviously this is a disappointing report, to say the least,” MF Global chief economist James F O’Sullivan said of the monthly jobs data. But given other promising signs, he said, he did not believe the recovery had been derailed. “Certainly the weight of evidence is that the economy is improving.”

Austan Goolsbee, chairman of the president’s Council of Economic Advisers, said, “This highlights that the recovery is fragile.” In addition to pressing for an extension of unemployment benefits, he called for a continuation of what are known as the Bush tax cuts for the middle class as well as a collection of proposals that the White House is now referring to as the Obama tax cuts.

“To have taxes go up on 98 percent of Americans,” Goolsbee said, “would pose a risk to the aggregate economic performance.”

The weak November job numbers will also feed the politically charged debate over whether the government should seek to aggressively reduce the deficit or be willing to spend more until the economy returns to better health. The stock markets shrugged off the report, which was well shy of the forecast for a gain of 1,50,000 jobs, as all the major indexes rose slightly on Friday.

Part of the surprise in the November report was that layoffs, which had subsided earlier this year, picked up again. The number of people who were unemployed because they had been laid off or had concluded a temporary assignment increased by 3,90,000.

Private companies, which have been hiring since the beginning of the year, added 50,000 jobs in November. Most of those increases came in the temporary help and health care sectors. Manufacturers, which had demonstrated some strength earlier in the year, eliminated 13,000 jobs, and despite recent sales increases, the retail sector shed more than 28,000 jobs. One sign of continued insecurity among employers was that temporary workers accounted for 40,000 of the jobs added in the private sector. Staffing firms said companies were continuing to use contract workers to fill gaps rather than binding themselves to permanent employees.

Employers are “still in the position of saying, ‘Hey, we need help, but only when we absolutely have to do we commit to permanent hiring’,” said Tig Gilliam, chief executive of Adecco North America. “That uncertainty takes time to overcome.”
Included in the latest report were revisions for previous months. The agency said that the economy added 172,000 jobs in October, more than the 151,000 it originally reported.

Risks remain

Many risks remain for the economy. The latest report showed 14,000 jobs were cut by local governments, a decline that could accelerate if states and towns were required to prune further to deal with shrinking budgets and larger deficits. With President Obama’s deficit commission examining long-term spending cuts,
unemployment benefits expiring and a Congressional fight looming over tax cuts, consumers could become more reluctant to spend despite some recent signs of renewed vigor. That, in turn, could cause businesses to reconsider hiring plans.

Advocates for the unemployed expressed dismay over the latest jobs report. “I’m still trying to get my jaw off the floor,” said National Employment Law Project deputy director Andrew Stettner.

“What it does is it kills the story that maybe I thought we could start telling, which was steady improvement. If we had four months in a row of improving jobs numbers, we would still need a lot of work to get back to full employment, but now it’s not even moving in the right direction.” The absence of robust hiring has puzzled some because companies are enjoying strong earnings and building large cash reserves.

“A lot of this profit increase has come about from cost-cutting,” said chief United States economist in HSBC’s global banking and markets unit Kevin Logan. “And I think a lot of businesses are saying they don’t have the pricing power they’d like, and they’re cautious about growth in final demand, and that may be reflected back to decisions about investment and job creation.”

Analysts generally estimate that the economy needs to add 1,00,000 to 1,25,000 jobs a month simply to keep up with new entrants to the labor force. So if employers keep hiring at the pace of recent months, it will do little to help reduce the unemployment rate for some time. At November’s pace, the unemployment rate could actually rise further. Some have predicted an unemployment rate of 10 percent next year.

There was little sign that companies were straining to meet demand by pushing existing workers. The average workweek held steady at 34.3 hours, while average hourly earnings increased by just 1 per cent, to $22.75. Usually, growth in wages and the number of hours worked point to more hiring.

The median length of time the unemployed had been out of work rose to 21.6 weeks, the third consecutive monthly increase. For those who have been searching for work for more than six months, this is a particularly discouraging prospect.

“I have looked high and low,” said Melissa Barone, who was laid off from a job in technical support 14 months ago. “I have a college degree and a ton of technical skills, but I can’t find a job.” Barone, 42, lives in St Clair Shores, Michigan. She has applied for hundreds of jobs but has yet to receive an offer.

If the economy is improving, that is news to Barone. “It doesn’t seem that way here,” she said.