By Tom Abate, San Francisco Chronicle, July 3, 2009
The U.S. unemployment rate rose to 9.5 percent in June, a 26-year high, as employers continued to slash payrolls, according to a Labor Department report that estimates 14.7 million Americans were out of work last month.
Employers cut 467,000 jobs in June, as construction and manufacturing continued to suffer big losses. Only health care bucked the downward trend and added jobs, the Labor Department said.
The United States has lost 6.5 million jobs since the recession began in December 2007. Employers have cut payrolls so deeply that the nation's job count has slipped to its May 2000 level, while 12.5 million adults have joined the labor force over the past nine years.
"This is the only recession since the Great Depression to wipe out all the job growth from the previous business cycle," said Heidi Shierholz with the Economic Policy Institute in Washington, D.C.
California will report its June job totals later this month. Thursday's bleak federal numbers suggest that the state unemployment rate, already at 11.5 percent, could head higher.
Despite rising unemployment, most economists think the recession is about to hit bottom and that the output of goods and services will begin to creep up by the end of the year.
"We're right about to turn the corner," said Lyle Gramley, a senior adviser with Stanford Washington Research Group.
But even this reasonably optimistic scenario envisions weak growth and a "jobless recovery" in which the U.S. unemployment rate will exceed 10 percent through 2010, before slowly declining over the next two to three years.
President Obama said Thursday he is "deeply concerned" about the job losses and understands that many families worry "whether they will be next."
Economist Nigel Gault with IHS Global Insight said Obama's stimulus package is only now starting to work its way into circulation and should start creating jobs in force by next year. But higher federal spending may simply offset state and local cutbacks in places like California that have their own budget woes.
"We may not get as big a jolt as we'd hoped but it would only be worse if the federal government hadn't stepped up spending," Gault said.
Thursday's Labor Department report shows no sign that the job market has hit bottom.
One indicator of weakness in the demand for labor is the number of hours in the average work week. It fell to 33 hours in June, the lowest on record since such measurements began in 1964, the Labor Department said.
That suggests that even when the demand for goods and services rebounds, employers will be able to meet it by adding hours for those already on payroll rather than creating jobs.
Mark Zandi, chief economist with Moody's Economy.com, said another worrisome indicator is the recent flattening of the average hourly wage.
Zandi said wages usually grow a few cents each month, and the flattening suggests that employers are finding it possible to cut their costs by lowering pay while workers are accepting reduced wages as preferable to layoffs.
Economist Heather Boushey with the Center for American Progress said the weak job market, and other factors like soft home prices, tend to make consumers cautious in an economy where their spending accounts for 70 percent of all activity. The reluctance to spend limits economic growth and puts more pressure on the job market in a downward spiral that has not yet run its course.
"It's pretty grim out there," Boushey said.
E-mail Tom Abate at email@example.com.
This article appeared on page C - 1 of the San Francisco Chronicle