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Unemployment rate rises to 9.8% as employers cut more jobs than expected

A net 263,000 jobs were eliminated in September, pushing the jobless rate to a 26-year high. The rate of unemployment plus underemployment - representing workers whose hours were cut back -- is 17%.

October 03, 2009|Don Lee and Tiffany Hsu

WASHINGTON AND LOS ANGELES — The nation's unemployment rate edged closer to double digits in September but only began to reflect the miserable reality confronting America's workforce.

The government reported Friday that the jobless rate rose to a 26-year high of 9.8%, up from 9.7% in August. The gauge's latest move up came as employers cut their payrolls by 263,000 jobs, far more than analysts had expected, raising fresh concerns about the economy's ability to sustain its budding recovery.

And those figures tell only part of the story.

For example, those who had jobs last month worked an average of only 33 hours a week, a record low.

And in addition to the 15.1 million people counted as officially unemployed, 9.2 million workers last month were working only part time because their employers had scaled back their hours or they simply could not find full-time jobs, the Labor Department reported.

Adding those two groups together, along with other categories such as people so discouraged that they have quit looking for jobs, produces a rate of unemployment plus underemployment, which stood at 17% in September.

This broader measure is significant not only because of the picture it paints of the hardships many workers face, but also because of what it suggests about the future -- and the picture isn't pretty.

Most government officials and outside economists believe the economy has technically entered a recovery; that is, the economy has stopped shrinking and begun to grow again. But many of these same experts are predicting a long period of high unemployment as well as stagnant wage growth for workers who do have jobs.

One contributing factor is the large pool of involuntary part-time workers.

By having their hours and workweeks shortened, they have experienced sometimes sharp reductions in income. That means a corresponding loss of purchasing power -- an indirect loss for the country as a whole because consumer spending now accounts for about 70% of economic output.

And for the future, many economists say that even if the prospect of recovery encourages businesses to step up production, many are likely to begin by restoring the hours of workers who were cut back, instead of hiring new workers.

"When the economy starts to recover, firms can expand quite a bit without adding new workers," said David Card, a labor economist at UC Berkeley.

Friday's report disappointed Wall Street, which had expected a smaller decline in the number of jobs. The Dow Jones industrials sank as much as 78 points before recovering somewhat to close at 9,487.67 points, down 21.61 points for the day. The drop came a day after the index tumbled 203 points on weak economic data.

Even with a recovery apparently underway, many employers aren't done ratcheting back work hours -- or days.

Media General Inc., a newspaper and television company based in Richmond, Va., told its employees in February to take 10 days off without pay because of the tough business situation. Last month the company added five more days between September and December.

In Wichita, Kan., workers at jet maker Hawker Beechcraft will be taking additional, unpaid days off around Thanksgiving and Christmas. The company is noncommittal about next year. "I don't know if it's safe to say things have stabilized," spokeswoman Nicole Alexander said.

Shannon Robinson, of Kihei, Hawaii, found out Thursday that her 40 hours of work a week as office manager at a small real estate company were being cut in half -- taking a big chunk out of her $45,000-a-year salary.

"I thought it might be coming," the 39-year-old mother of two said. "With the market tanking, I know how slow it is. . . . We don't know how long this situation will last. It could just be for October. It could be for the rest of the year, it could be for another year."

With Robinson's husband collecting unemployment benefits -- he has been laid off twice since last year -- she said the family would be spending just one-fourth of its usual budget for holiday shopping.

Like Robinson, most part-time employees who want full-time work aren't the youngest or oldest in the labor force but are in their prime working years, between ages 25 and 54, according to Labor Department statistics.

It's stories like the Robinsons' that worry economists. The Obama administration's massive stimulus package and other government measures have bolstered car sales, beefed up home purchases with tax credits and plowed billions into highway and environmental work projects.

Although there are signs that the housing market and manufacturing are stabilizing, the stubbornly grim job market still threatens consumer spending and the recovery itself.

Alan Krueger, the Treasury Department's chief economist, on Friday sought to put the best light on the latest labor statistics, noting that the pace of job loss had slowed each quarter this year despite monthly fluctuations, from 691,000 in the first three months to 256,000 in the third quarter.

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