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U.S. unemployment climbs to 9.8%, raising doubts about recovery

Hiring unexpectedly stalled last month: Employers added only 39,000 jobs, compared with 172,000 in October.

December 04, 2010|By Don Lee, Los Angeles Times

Reporting from Washington — In a potentially serious setback for the U.S. economy, hiring unexpectedly stalled in November while the nation's unemployment rate jumped to 9.8%, reversing a pattern of slow but steady improvement in the prospects for American workers.

The grim report released Friday by the Labor Department flew in the face of strong job growth in October and a slew of largely positive economic indicators in recent days. And it called into question the belief of most economists that the recovery from the worst recession in a generation was gaining momentum.

Although jobs data from any single month can't be weighed too heavily, November's figures suggest that many U.S. companies — especially manufacturers — have found ways to supply any growth in demand for their products without expanding payrolls.

For one thing, most companies are operating well below maximum capacity. Many are also squeezing more productivity out of existing employees and spending heavily on new, more efficient equipment and technology.

"We've found ways of doing things faster and better," said Alan Parkhill, president of Banner American Products Inc., a maker of machines for schools and the print industry. The Temecula, Calif., firm employs 25 workers, down more than 20% from late 2007 when the recession started.

"It's sad to say, but … you get rid of somebody and thought they were integral but then you find out you don't suffer," Parkhill said. "You realize you were bloated."

All that points toward the prospect that high unemployment levels could stretch much further into the future than most economists had expected.

In addition to inflicting immediate hardships on millions of idle workers, elevated joblessness could act as a drag on the overall economy, imposing heavy costs on working Americans in the forms of slow growth, more belt-tightening, falling tax revenues for government at all levels and higher costs for aid programs.

"It's certainly disappointing. It's certainly a jobless recovery," said Chris Rupkey, chief financial economist at the Bank of Tokyo-Mitsubishi in New York.

The Labor Department said employers nationwide added a paltry 39,000 jobs last month, most at temporary-help firms and in health services. In October, employers added a heartening 172,000 jobs, which most economists saw as a sign of a gradually accelerating recovery.

The November slump pushed the overall unemployment rate, which had held steady at 9.6%, upward for the first time since August. The jobless figure for college graduates jumped to 5.1% in November, the highest on record.

"Most business owners now are content to just run the cash register but not make any big investment," said Jack Ablin, chief investment officer of Harris Private Bank in Chicago. "They're in maintenance mode."

In some cases, analysts said, employers are holding back from hiring because sales are still weak and the outlook remains uncertain. Although consumer holiday spending so far has exceeded expectations, many experts doubt that such growth is sustainable given high household debt loads, tight credit and weak income and housing growth.

"We're still bouncing around the bottom," Kermit Baker, chief economist at the American Institute of Architects, said about business at architectural firms, which have been hammered by the depressed real estate market. "I think it's going to improve in the months ahead," he said, "but not very quickly."

Wall Street took the dismal jobs report in stride: Major stock indexes closed up slightly Friday.

That may reflect uncertainty about whether the November data marked a new trend or were only an aberration. Also, some may see the bad news as supporting — or possibly accelerating — the Federal Reserve's recently announced bond-buying purchases to stimulate economic activity.

Looking ahead, California equipment maker Parkhill sees business activity continuing to pick up and hopes he can begin hiring soon.

On Friday union leaders and other advocates for workers joined Vice President Joe Biden in calling on Congress to renew extended unemployment benefits that began to expire for many workers last month.

Two million jobless workers, including about 450,000 in California, will see their benefits end this month. The White House estimates that an additional 5 million unemployed people face losing their benefits coverage next year.

"Not only is it the right thing to do," Biden said, unemployment insurance is also a "powerful driver of economic growth."

By the Labor Department's count, the number of unemployed workers once again rose above 15 million in November. More than 40% of them, about 6.3 million people, have been out of work for more than six months.

Carolyn Hartt, who has been jobless since September 2009, wouldn't be surprised at the disappointing employment report. The 57-year-old Westfield, Mass., woman says she hasn't seen hiring picking up much. Before she was laid off, Hartt made $68,000 a year, plus $15,000 in commission and bonus, working in pharmaceutical sales.

"I've even put in for Home Depot," she said. Hartt's unemployment benefits will expire early next year. "To me, it's a lifeline.... Without it, I don't know where we'd be."

Last month the retail industry eliminated 28,000 jobs, despite increases in sales and rising consumer confidence. Government payrolls fell by 11,000. Construction lost 5,000 jobs. Average weekly work hours and earnings were flat.

"It was an across-the-board bad report," said Heidi Shierholz, a labor economist at the Economic Policy Institute. "This could just be the nature of the kind of recovery we're in — it's just sluggish."

don.lee@latimes.com

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