Recovery outlook dim with loss of 85,000 jobs
By Christopher S. Rugaber
WASHINGTON — Lack of confidence in the economic recovery led employers to shed a more-than-expected 85,000 net jobs in December even as the unemployment rate held at 10 percent. The rate would have been higher if more people had been looking for work instead of leaving the labor force because they can't find jobs.
The sharp drop in the work force — 661,000 fewer people — showed that more of the jobless are giving up. Once people stop looking for jobs, they're no longer counted among the unemployed.
When discouraged workers and part-time workers who would prefer full-time jobs are included, the so-called "underemployment" rate in December rose to 17.3 percent, from 17.2 percent in November. That's just below a revised figure of 17.4 percent in October, the highest on records dating from 1994.
Many analysts had hoped yesterday's report would show the economy gained jobs for the first time in two years. While the revised figures found an increase in November, it was tiny.
"One word sums it up: Disappointment," said Jonathan Basile, an economist at Credit Suisse.
The drop in the labor force, Basile said, "tells me that Main Street doesn't believe there's a recovery yet, because they're not out looking for jobs yet."
Revisions to the previous two months' data showed the economy actually generated 4,000 jobs in November, the first gain in nearly two years. But the revisions showed it also lost 16,000 more jobs than previously estimated in October.
The participation rate in the labor force — the portion of adults either working or looking for work — fell in December to 64.6 percent, the lowest since August 1985.
The drop was particularly steep in the second half of last year. That suggested that people were becoming discouraged about their job prospects even as layoffs slowed. The reason is that job openings remain far too few.
The labor force has shrunk by 1.9 million people since May. Without the drop, December's jobless rate could have been as high as 10.4 percent, according to Larry Mishel, president of the Economic Policy Institute. And some economists think the rate will near 11 percent as more job-seekers eventually stream into the work force.
Yesterday's report caps a disastrous year for U.S. workers. Employers cut 4.2 million jobs in 2009. And the unemployment rate averaged 9.3 percent. That compares with an average of 5.8 percent in 2008 and 4.6 percent in 2007. Nearly 15.3 million people are unemployed, an increase of 3.9 million during 2009.
"The economy is in a rough situation," Labor Secretary Hilda Solis said. She said she thinks companies are reluctant to ramp up hiring because they're waiting to see what new stimulative steps the government might take to provide relief.
The economy has lost more than 7.2 million jobs since the recession began in December 2007. And while layoffs have slowed, they haven't ended. UPS said yesterday it will cut 1,800 jobs. And defense contractor Lockheed Martin Corp. said this week it's cutting 1,200 workers.
If jobs remain scarce, consumer confidence and spending could flag, slowing the economic recovery. Many analysts estimate the economy grew by 4 percent or more at an annual rate in the October-December quarter, after 2.2 percent growth in the third quarter.