Jobless rate hits 10.2%, first time over 10% since '83
By Paul Davidson, USA TODAY
WASHINGTON — The nation's unemployment rate shot up more sharply than expected last month, to 10.2% from 9.8% in September, as employers shed 190,000 jobs.
It marks the first time since 1983 that the jobless rate has reached 10%. Unemployment for adult men and teen-agers set records as major industries such as construction and manufacturing continue to slash tens of thousands of jobs, the Bureau of Labor Statistics reported Friday.
"It's a very disconcerting report," says Mark Zandi, chief economist for Moody's Economy.com.
Chris Rupkey of Bank of Tokyo-Mitsubishi, among the few economists who had been expecting a strong recovery, says the big jump in the unemployment rate "is like a kick in the stomach" to hopes for a robust upturn.
President Obama called the jobless rate a "sobering" figure that underscored the economic challenges ahead.
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About 15.7 million Americans were out of work in October and 7.3 million have lost their jobs since the recession started in December 2007.
The 190,000 jobs cut from payrolls in October are slightly more than the 175,000 analysts expected. Still, the pace of job losses has been moderating, with an average 188,000 eliminated the past three months, vs. 357,000 the previous three months and 645,000 from November through April.
In addition, BLS revised downward the number of job losses in August and September by about 100,000.
Yet the unemployment rate jumped far above the 9.8% economists were expecting as 558,000 Americans joined the jobless rolls while few left the labor force.
The apparent disparity between the number of payroll jobs cut and the unemployment rate stems from the fact that the two figures are derived from different surveys. The unemployment rate is determined by a survey of just 60,000 households that tends to be less reliable than a payroll survey of thousands of employers.
In a recovery, however, the household survey typically shows improvement first because it more broadly reflects the practices of all employers, including small businesses. The payroll survey largely canvasses bigger companies, which have seen increased productivity and higher earnings.
"Small businesses tend to lead the way out" of recession "and that's just not happening here," Zandi says. "They're shedding workers and that's the most worrisome aspect of what's going on in the job market."
Zandi expects unemployment to peak at 11% by mid-2010, up from his previous estimate of 10.5%.
The unemployment rate for adult men hit a record 10.7%, while teen-age unemployment reached a record 27.6%. For the first time, the percentage of teen-agers out of work exceeded the percentage employed, 26.2%.
Even more discouraging, the number of Americans unemployed six months or longer hit a new high of 5.6 million, or 35.6% of the jobless. Congress on Thursday extended unemployment benefits by up to 20 weeks for almost 2 million people out of work nearly a year or more.
And the underemployment rate — which includes the unemployed, people working part time even though they wanted full-time work, and those who stopped looking for work — rose to a record 17.5%.
Some economists expected that employers at least would begin increasing the hours of those who are working. But the average work week held steady at a record low 33 hours.
One encouraging sign, however, is the addition of 34,000 temporary jobs, first significant increase since the recession began. Analyst say employers will hire temporary workers as a first step toward permanent hiring. Also, average weekly earnings rose to $18.72 from $18.67.
Among specific industries, manufacturers slashed 62,000 jobs in October, up from 51,000 in September but less than the 161,000 average from last October through June. Some economists expected job losses to drop sharply in October after the Institute of Supply Management this week said a measure of factory employment signaled growth last month for the first time in 14 months.
The construction industry shed 62,000 jobs, down from an average 117,000 the previous six months.
And retailers slashed 40,000 jobs, about the same as September.
Another report said U.S. businesses cut inventories at the wholesale level for a record 13th month in September, but sales rose for a sixth straight time.
The Commerce Department said that businesses reduced inventories at the wholesale level 0.9% in September, slightly less than expected. Sales by wholesalers rose 0.7%, slightly better than the 0.6% gain economists expected.
The hope is steadily rising sales will encourage businesses to begin restocking shelves, a move that would boost production and bolster an economic recovery. But worries persist that consumer spending, which accounts for 70% of economic activity, could falter as various government stimulus programs begin to wane and unemployment keeps surging.
October was the 22nd straight month the U.S. economy has shed jobs, longest stretch on records dating back 70 years.
Many companies are squeezing more production from their existing workforces. Productivity, the amount of output per hour worked, jumped 9.5% in the third quarter, the Labor Department said Thursday.
That's the sharpest increase in six years and followed a 6.9% rise in the second quarter. The increases enable companies to produce more without hiring extra people.
The Federal Reserve said earlier this week that it will keep a key interest rate at a record low level of nearly zero for an "extended period" to support the economy.
The central bank said economic activity has "continued to pick up," but Fed Chairman Ben Bernanke and his colleagues warned that rising joblessness and tight credit could restrain the rebound in the months ahead.
