"Job Losses Slow; Unemployment at 9.4%
By JACK HEALY
The U.S. unemployment rate was the highest in 26 years, the government said on Friday, but the loss of 345,000 jobs in May, fewer than expected, was seen as a sign that the job market was no longer in free fall.
Job Losses Slow; Unemployment at 9.4%
The United States economy lost 345,000 jobs in May, the government reported on Friday, a sharp slowing in the pace of job losses that fueled hopes that the economy was on its way toward stabilizing.
The recession continued to take a toll as the unemployment rate climbed to 9.4 percent, its highest point in a quarter-century. The rate — a measure of jobless people looking for work — rose more than expected, partly because more people were resuming the hunt for a job.
Economists were encouraged that businesses were cutting fewer jobs, but six million jobs have now disappeared since the recession began in December 2007, and 14.5 million people are now unemployed. They warned that job losses were likely to pile up through the rest of the year as the country’s labor market bottomed out. “These are still terrible numbers,” said Ian Shepherdson, chief United States economist at High Frequency Economics. “We’re a million miles away from a recovery.”
Financial markets nonetheless sensed recovery a bit nearer. Futures on the Dow Jones industrial average rose, and the price of oil shot above $70 a barrel for the first time since November, bolstered by hopes that demand would rebound as the global economy recovered.
In normal times, the loss of so many jobs in a single month would have been interpreted as a calamity. But 18 months into the longest recession since the 1930s, economists said the milder pace of job losses indicated that the economy was gradually leveling off as government stimulus money trickled out and businesses reined in their budgets and payrolls. ( NB DON )
“Things are still getting worse, but the pace of decline has slowed down,” said David Wyss, chief economist at Standard & Poor’s. “Over all, it’s not quite as dire as it looked in the first quarter.”
The economy lost an average of more than 700,000 jobs per month during the first three months of the year as shocks from the credit crisis surged through the broader economy. But the pace of job losses eased to a revised 504,000 in April, a welcome sign that the decline in the job market would not continue forever.
Still, by nearly any measure, workers endured another brutal stretch of layoffs, furloughs and pink slips in May. Even as the broader economy made some halting steps toward recovery, businesses continued to slash their staffs and cut employee hours. Economists were expecting 520,000 job losses in May, and predicted the unemployment rate would reach 9.2 percent.
“There’s no question that the jobless rate is going to continue to rise,” said Bernard Baumohl, managing director of the Economic Outlook Group. “It’s a dismal job market. It’s going to remain awful easily for the balance of this year.”
Just this week, General Motors announced it was closing or idling 14 plants across the country, including several in Michigan, which has the nation’s highest unemployment rate. The closings will affect as many as 20,000 workers, and are just part of a vast reorganization by the automakers G.M. and Chrysler.
Across the country, parts suppliers, dealers and other workers tied to the auto industry are bracing for what comes next.
Some economists, anticipating an additional two million job losses nationwide, say the job market will be a disaster zone even after the economy starts to heal. After months of sharp economic contraction and falling profits, many employers will be reluctant to expand their work forces to meet the first increases in orders and sales.
Instead of hiring full-time workers, many employers are likely to hire temporary workers as needed, or have their extant employees work overtime. Economists said the length and severity of this recession will make businesses especially leery about re-inflating their payrolls once growth eventually resumes.
“Growth is going to be very sluggish,” Mr. Baumohl said. “Even when the economy begins to recover, we might be witnessing the mother of all jobless recoveries.”
That could be extremely problematic for people like Dante Whitfield, one of the approximately 24 million people out of work or forced to work part-time in the United States.
Since losing his job as a legal courier in February, Mr. Whitfield, 35, said he has been riding the bus around San Jose, Calif., to go look for jobs, eating from the McDonald’s Value Menu, and trying to get by on unemployment checks. He said he has no prospects of well-paying work.
“There’s days I come home in tears,” he said. “You just feel lost. You don’t know what to do.”