Outlook weak for workers this year

By Barbara Hagenbaugh
USA Today

WASHINGTON — Despite an upswing in the economy, the job market may be weakening and it could be the end of the year or even 2003 before a strong job recovery takes hold, economists say.

The government said last week that the number of people collecting jobless benefits rose to a seasonally adjusted 3.8 million — the highest in 19 years — in the week ended April 27. That news followed a report last week that the jobless rate jumped to 6 percent in April, the highest since August 1994.

"We're looking for the unemployment rate to continue to rise through the fourth quarter," said Christine Chmura, president of Chmura Economics & Analytics.

"We're probably going to be hanging around the 6 percent mark for another six, seven or eight months," said Steven Wood, chief economist at FinancialOxygen.

The job market typically continues to weaken after the rest of the economy strengthens. After the last recession, which ended in March 1991, the unemployment rate rose for more than a year.

Factors restraining the job market include:

• Expanding pool of workers. When the economy starts improving, workers who dropped out of the labor force when times were tough start looking for jobs. In April, 565,000 people entered the labor force. Unless the number of new jobs rises at the same pace as the labor force expands, more people will be out of work.

• Firms are nervous. Even if the economy is on the mend, businesses are going to be reluctant to hire balance sheets improve.

This is especially the case now because worker productivity is soaring. Productivity rose 8.6 percent in the first quarter, the fastest gain in nearly 20 years. That means firms are squeezing more output from their workers and can hold off hiring until they feel more confident.

• Extended benefits. Earlier this year, Congress passed a measure allowing people to receive an additional 13 weeks of jobless benefits after their regular 26 weeks ran out. Analysts say some may be more selective knowing they have more time to receive aid.