Sound The Trumpet : Job Losses Overshadow Signs of Recovery

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“Job Losses Overshadow Signs of Recovery”
by msnbc - John W. Schoen
October 2nd, 2009

New York--There were some hopeful signs among the blizzard of economic data released this week. But the recovery from the worst downturn in decades remains hostage to one of the ugliest numbers on the list: the unemployment rate.

"The hole that has been blown in the labor market is absolutely enormous,” said Heidi Shierholz, an economist with the Economic Policy Institute.

That hole continues to widen. On Thursday, the Labor Department said initial claims for unemployment insurance rose to a seasonally adjusted 551,000 — up from 534,000 in the previous week and more than Wall Street economists expected.

The data followed a report Wednesday from payroll manager ADP showing that U.S. companies cut 254,000 jobs in September, also more than forecast. Government figures for September, including the official unemployment rate, will be released Friday morning.

The bad news on the job front has been partially offset by other signs that the economy may be on the mend. A private trade group said Thursday that manufacturing expanded for the second straight month in September, but at a slightly slower pace than in August and not as robustly as economists predicted. Construction spending also rose a bit in August.

And consumer spending, which accounts for 70 percent of total economic activity, jumped in August by the largest amount in nearly eight years, even though personal incomes continued to lag. Housing sales have also perked up this summer; pending sales of existing homes rose 6.4 percent in August.

But consumer spending and home buying have gotten a big boost from government programs like the hugely popular Cash for Clunkers car buying subsidies, which has expired, and the $8,000 first-time home buyer tax credit, which expires at the end of next month.

Indeed, auto sales at Ford and Chrysler dropped in September, showing that automakers were likely to have a tough time luring buyers into showrooms now that the clunkers program has ended.

Consumers may not be able to continue to boost spending without government subsidies — especially the nearly 7 million workers who have lost their jobs since the worst economic downturn since the Great Depression began in December 2007.

Even if the economy were to rebound sharply, the job market would have to create 400,000 jobs a month, every month, for two years to put those people back to work. Economists and government officials, including Federal Reserve Chairman Ben Bernanke, warn that the recovery will likely be very weak

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