UNEMPLOYMENT SKYROCKETS TO 8.5%

HIGHEST RATE SINCE 1983

WASHINGTON -- The U.S. unemployment rate jumped to 8.5 percent in March, the highest since late 1983, as a wide swath of employers eliminated 663,000 jobs. It is fresh evidence of the toll the recession has inflicted on America's workers, and economists say there's no relief in sight.

If part-time and discouraged workers are factored in, the unemployment rate would have been 15.6 percent in March, the highest on records dating to 1994, according to Labor Department data released Friday.

The average work week in March dropped to 33.2 hours, a new record low.

"It's an ugly report and April is going to be equally as bad," predicted Mark Zandi, chief economist at Moody's Economy.com.

Last month's tally of job losses was slightly higher than the 654,000 that economists expected. The rise in the unemployment rate matched expectations.

Employers cut 651,000 jobs in February when the jobless rate was 8.1 percent, the same as initially estimated. January's job losses, however, were revised much higher, to 741,000 from 655,000.

Since the recession began in December 2007, the U.S. economy has lost a net total of 5.1 million jobs, with almost two-thirds of the losses occurring in the last five months.

The number of unemployed people climbed to 13.2 million in March. In addition, the number of people forced to work part time for "economic reasons" rose by 423,000 to 9 million. Those are people who would like to work full time but whose hours were cut back or were unable to find full-time work.

Looking forward, economists expect monthly job losses continuing for most -- if not all of -- this year.

However, they are hoping that payroll reductions in the current quarter won't be as deep as the roughly 685,000 average monthly job losses in the January-March period.

In the best-case scenario, employment losses in the present quarter would be about half that pace, some economists said. That scenario partly assumes the economy won't be shrinking nearly as much in the present quarter.

The deterioration in the jobs market comes despite a few hopeful signs recently that the recession -- now the longest since World War II -- could be easing.

Orders placed with U.S. factories actually rose in February, ending a six straight months of declines, the government reported Thursday. Earlier in the week, there was better-than-expected reports on construction spending and pending home sales. And last week a report showed that consumer spending -- an engine of the economy -- rose in February for the second month in a row -- after a half-year of declines.

But as the economic downturn eats into their sales and profits, companies are laying off workers and resorting to other cost-saving measures. Those include holding down hours, and freezing or cutting pay, to survive the storm.

Job losses were widespread last month. Construction companies cut 126,000 jobs. Factories axed 161,000. Retailers got rid of nearly 50,000. Professional and business services eliminated 133,000. Leisure and hospitality reduced employment by 40,000. Even the government cut jobs -- 5,000 of them.

Education and health care were the few industries showing any job gains.

Federal Reserve Chairman Ben Bernanke said the recession could end later this year, setting the stage for a recovery next year, if the government is successful in bolstering the banking system. Banks have been clobbered by the worst housing, credit and financial crises to hit the country since the 1930s.

Even if the recession ends this year, the economy will remain frail, analysts said. Companies will have little appetite to ramp up hiring until they feel the economy is truly out of the woods and any recovery has staying power.

Given that, many economists predict the unemployment rate will hit 10 percent at the end of this year. The Fed says unemployment will remain elevated into 2011.

Economists say the job market may not get back to normal -- meaning a 5 percent unemployment rate -- until 2013.

"There's going to quite a long haul before you see the jobless rate head down," said Bill Cheney, chief economist at John Hancock Financial Services.

To brace the economy, the Fed has slashed a key bank lending rate to an all-time low and has embarked on a series of radical programs to inject billions of dollars into the financial system.

And the Obama administration had launched a multi-pronged strategy to turn the economy around. Its $787 billion stimulus package includes money that will flow to states for public works projects, help them defray budget cuts, extend unemployment benefits and boost food stamp benefits.

The administration also is counting on programs to prop up financial companies and reduce home foreclosures to help turn the economy around.

Still, skittish employers announced more job layoffs this week.

3M Co., the maker of Scotch tape, Post-It Notes and other products, said it's cutting another 1,200 jobs, or 1.5 percent of its work force, because of the global economic slump. Fewer than half the jobs will be in the U.S., but include hundreds in its home state of Minnesota. The 1,200 figure includes cuts made earlier in the first quarter.

Elsewhere, healthcare products distributor Cardinal Health Inc. said it would eliminate 1,300 positions, or about 3 percent of its work force, and semiconductor equipment maker KLA-Tencor Corp. said it will cut about 600 jobs, or 10 percent of its employees.

Job shortage for young people

American employers eliminated 51,000 jobs in July, the seventh consecutive contraction in the labour market, as the unemployment rate reached a four-year high, signs that the pressure on business owners and consumers was likely to continue.

Still, last Friday’s report from the U.S. Labor Department showed that the declines have softened since spring. The number of layoffs was less than the 75,000 that economists had expected, and the government said that businesses cut fewer jobs in June and May than first thought.

"The good news is there’s been no acceleration in the official data," Robert Barbera, the chief economist of ITG, an economic research company.

"The bad news is there’s nothing about the data that suggests improvement anytime soon."

The rough job market worsened in July, with the unemployment rate rising to 5.7 percent from 5.5 percent in June, its highest level since March 2004.

"It’s not that unemployment is rising because a lot of people are coming into the labour force," Mark Zandi, the chief economist at Moody’s Economy.com, said. "It’s rising because employment is falling."

Part of the problem is a paucity of jobs for young people, one out of five of whom are unemployed. The teenage unemployment rate rose to 19 percent, its highest level in 16 years.

Last month’s job losses came in a broad range of industries, with manufacturing, construction and administrative services suffering the steepest declines. About 30,000 support staff workers were laid off, along with 35,000 manufacturing employees.

Workers in the transportation industry were hit hard by high oil prices, which have weighed heavily on bottom lines. About 5,000 truck drivers were laid off, and airlines also trimmed their work forces.

Stocks on Wall Street were trading lower, with the Dow Jones industrials down about 50 points, as investors digested the jobs report and a $15.5-billion quarterly loss at General Motors.

Businesses have been cutting workers since the start of the year as they try to make ends meet amid a slowdown. While export sales have risen, many American customers have ratcheted back their spending to cope with expensive fuel and food and the ailing housing market.

U.S. job losses moderate in April

Nonfarm payrolls down 20,000; unemployment rate falls to 5.0%

By Greg Robb, MarketWatch

WASHINGTON (MarketWatch) -- Job losses decelerated in April, suggesting that the nation's economic downturn may be short and shallow rather than long and severe.

Nonfarm payrolls fell by 20,000 -- far fewer than the average 80,000 jobs per month lost during the first quarter of the year, Labor Department data showed.

The decline was much less than expected. Economists surveyed by MarketWatch expected job losses of 78,000.

April's jobless rate inched down to 5.0% from 5.1% in March. Economists had expected the jobless rate to tick higher to 5.2%.

The report suggests that the U.S. labor market didn't continue to deteriorate in April.

It may bolster the case that a pause by the Federal Reserve is in order following its aggressive campaign of lowering interest rates. But there will be another jobs report before the next Fed meeting at the end of June.

"For now, this employment trend is validating signals sent by the FOMC earlier this week to take a pause in rate cuts," wrote Stephen Gallagher, economist for Societe Generale. The report "lessens the fears of a deep, or prolonged downturn in the economy."

The construction and manufacturing sectors continued to shed jobs in April, but less-cyclical sectors such as education offset these declines.

There was little change to estimates for prior months. Payrolls growth in the previous two months was revised lower by a total of 8,000.

While jobs held up relatively well in April, other aspects of the employment report pointed toward a weak labor market.

The jobless rate fell simply because unemployed workers got jobs in April. Employment rose by 362,000. Unemployment fell by 189,000 to stand at 7.6 million.

Average hourly earnings increased a less-than-expected 1 cent, or 0.1%, bringing the year-over-year gain down to 3.4%.

"Based on the job report details, personal income growth for April will be very weak," wrote Ken Mayland, chief economist for ClearView Economics.

The average workweek fell six minutes to 33.7 hours. The factory workweek fell 18 minutes to 40.9 hours, and overtime in the sector was down by six minutes.

Total hours worked in the economy fell by 0.4%.

Sectors

Factory payrolls fell by 46,000, with the weakness concentrated in the production of durable goods.

Private-sector employment fell by 29,000 jobs in April. This was weaker than the 10,000 payroll jobs added in the month as estimated in the ADP national employment report that came out Wednesday.

Service-producing industries added 90,000 jobs last month, with stronger growth seen in health care, professional services, and leisure and hospitality industries. Temporary-help jobs rose by 39,000.

Construction jobs fell by 61,000 in April. Since its peak in September 2006, construction employment has fallen by 457,000 jobs.

Greg Robb is a senior reporter for MarketWatch in Washington.

Jobs Grow, Productivity Up In U.S.

Andrew Farrell, 12.05.07, 4:30 PM ET

American worker productivity and job growth leapt higher last month, but its unlikely the stronger-than-expected data will be enough to dissuade Federal Reserve policymakers from slashing interest rates next week to ensure the U.S. economy stays out of recession.

An analysis of payroll data released on Wednesday showed an increase in private-sector employment of 189,000 during November, significantly above market expecations. The analysis, which was performed by Macroeconomic Advisers, used payroll data from Automatic Data Processing (nyse: ADP - news - people )'s clients. The number was more than twice the 65,000 rise expected by analysts.

The growth was stronger than expected and bigger than the previous month's gains. On Wednesday, ADP and Macroeconomic Advisers upwardly revised their figure for October growth to 119,000, an increase of 13,000. That remains below the 166,000 reported by the federal government for the month, though the figures often are subject to change and the federal government data also includes government jobs. ADP processes paychecks for more than 20 million U.S. workers, and the company feels it has insight into employment trends.

The sizable November growth was boosted by a rapidly growing service-producing sector. Service jobs climbed by 197,000, according to the ADP data. That compensated for a decline of 8,000 jobs in the goods-producing sectors.

The November employment data showed signs of stabilization in the troubled residential-construction and mortgage-lending sectors. Jobs in both areas have tumbled over the past year because of a weak U.S. housing market and restricted mortgage lending.

"Today’s data suggest that in these two crucial sectors employment may be stabilizing. In November, construction employment fell for the 12th consecutive month, but November’s decline of 6,000 was the smallest since January," said Joel Prakken, chairman of Macroeconomic Advisers. "Employment in financial activities, which declined by 16,000 from July through October, reversed course and grew 10,000 in November."

Also Wednesday, the Labor Department reported that worker productivity climbed at an annualized rate of 6.3% during the third quarter, an upward revision from the previous rate of 5.7%. The climb was stronger than expected and the biggest growth since the summer of 2003.

Despite the strong economic data, the Fed is widely expected to cut interest rates by at least 25 basis points next week. Central bankers are worried the U.S. economy is losing steam. Federal Reserve Governor Janet Yellen said earlier this week she expects "very meager" fourth-quarter growth. (See: "San Francisco Fed's Yellen Sees Weaker Economy")

University of Maryland business professor Peter Morici explained the robust productivity growth actually gives the Fed more leverage to cut interest rates. "Continued strong productivity growth helps keep inflation in check in the face of rising oil prices, and accommodates moderate wage growth," he said. "The Fed can focus on the subprime crisis and stabilizing credit markets without fear of a significant surge in inflation."

The favorable economic data apparently pushed investors from bonds to equities early on Wednesay. The Dow Jones industrial average closed 1.5% higher, while prices fell on U.S. government bonds, sending the yield on the 10-year Treasury note to 3.94% from 3.89% late on Tuesday. The dollar gained 0.6% against the Euro.

There was some bearish economic data released Wednesday. The Institute for Supply Management said its index measuring activity in the non-manufacturing industry fell to 54.1 in November from 55.8 in October. Economists had expected a November reading of 54.8.

The Associated Press and Thomson Financial News contributed to this artricle.




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Labor market stronger than expected in November

Payrolls up 94,000; jobless rate stays at 4.7% on household survey gains

By Rex Nutting, MarketWatch

Last update: 10:38 a.m. EST Dec. 7, 2007

WASHINGTON (MarketWatch) -- The U.S. labor market was slightly stronger than expected in November, the government said Friday, a factor that's likely to weigh on the Federal Reserve's decision next week on whether to cut interest rates.

The economy added 94,000 nonfarm payroll jobs last month, according to a survey of business establishments, the Labor Department said in a mixed report released Friday. Read the full report.

Economists surveyed by MarketWatch were expecting growth of 85,000. See Economic Calendar.

"The November employment report was not a blowout, but it was certainly healthy enough to put off talk that the economy is careening off the cliff into a recession," wrote Stephen Stanley, chief economist for RBS Greenwich Capital.

Payrolls had risen a revised 170,000 in October. Payroll growth in September and October was revised lower by a total of 48,000.

However, a separate survey of households showed the strongest job growth in nearly six years, with 696,000 more people saying they had jobs in November. As a result, the unemployment rate was steady at 4.7%.

Economists were expecting the unemployment rate to tick higher to 4.8%.

"Today's report does little in the way of clearing up what has been a somewhat cloudy economic outlook of late.," wrote Richard Moody, chief economist for Mission Residential.

Ahead of the report, economists were expecting the Federal Open Market Committee to lower its overnight lending rate by a quarter percentage point to 4.25% at its meeting on Tuesday, but some market participants are looking for a half-point cut. Last week, St. Louis Fed President William Poole said a large gain in payrolls could force the market to re-evaluate its expectations for a big easing.

The middle-of-the-road report "will allow the FOMC to do whatever it wants on Tuesday, wrote Joshua Shapiro, chief economist for MFR Inc. Other analysts said the FOMC would likely cut the federal funds rate by a quarter point next Tuesday. See full story.

The strength in the household survey in November is a conundrum, following months of weakness. Some economists suggested the gains reflected problems in seasonally adjusting the raw data.

Employment in the household survey had fallen by a total of 250,000 since March, leading some economists to believe the economy was much weaker than the payroll survey suggested. Economists generally judge the payroll survey to be more accurate, but acknowledge that the household survey could do a better job of catching turning points in the economy.

In a separate report, the Reuters/University of Michigan consumer sentiment index fell again, hitting the second lowest level in 15 years; only the month after Hurricane Katrina hit was worse. See full story.

Details

Payrolls have grown by an average of 103,000 per month over the past three months, the best since July.

The employment participation rate -- the percent of adults who were in the labor force -- rose from 65.9% to 66.1%, also the best since July.

Average hourly earnings rose 8 cents, or 0.5%, well ahead of the 0.3% expected. October's wage growth was revised lower to a 1 cent gain. In the past year, average hourly earnings are up 3.8%.

Goods-producing industries cut 33,000 jobs in November, including 24,000 in construction and 11,000 in manufacturing.

Services-producing industries added 127,000 jobs. Financial services cut 20,000 jobs.

Government added 30,000, including 13,000 in education, continuing a string of strong hiring in schools.

Professional and business services added 24,000 jobs, including 11,000 in temporary-help services, a sign that businesses could be cautiously optimistic about the economy.

Retail industries added 24,000 jobs, the first gain since July. Education and health-care added 28,000 jobs.

Total hours worked in the economy increased 0.1%. The average work week was steady at 33.8 hours. Hours worked in manufacturing increased by 0.2%.

Of 278 industries, 49.8% were hiring in November, the first month since September 2003 that fewer than half of industries were adding jobs. Of 84 manufacturing industries, 45.2% were hiring in November.

Rex Nutting is Washington bureau chief of MarketWatch.

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