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Unemployment stays at 9.6% as schools, governments slash jobs

Hiring growth in the private sector weakened and the economy lost a net 95,000 jobs in September, the Labor Department says, as the nation's unemployment outlook remained dim in the final jobs report before the midterm elections.

October 09, 2010|By Don Lee, Los Angeles Times

Reporting from Washington — A sharp falloff in local-government payrolls, mostly at public schools, added an ominous new weight to the depressed labor market last month as the American economy lost 95,000 jobs and the unemployment rate remained at 9.6%.

In the last monthly employment report before the Nov. 2 midterm elections, which many see as a referendum on the economy, the Labor Department said Friday that private employers added just 64,000 jobs in September — not nearly enough to offset the large cuts in public payrolls.

Moreover, most of the private-sector job gains were lower paying, part time or short term and were at businesses such as temporary help firms and eating and drinking establishments. Manufacturing jobs dropped for the second straight month, and construction fell back in September.

The poor jobs report increases the likelihood that Federal Reserve policymakers, at their next meeting in early November, will launch a new round of Treasury bond purchases to stimulate economic activity.

Investors were encouraged by that prospect, pushing the Dow Jones industrial average above 11,000 on Friday for the first time since May.

The gain came despite warnings by some analysts that a new move by the Fed to print hundreds of billions of dollars could drive down the value of and global confidence in the dollar, as well as add to a brewing international dispute over currency exchange rates and trade.

"We believe that [the possible Fed action] would be powerful medicine with potentially severe side effects," Richard Hoey, chief economist at BNY Mellon and Dreyfus, said in a note to investors.

Stocks have rebounded since early September partly because some recent economic indicators — income, spending and unemployment insurance filings — have been moving in a more positive direction.

But Friday's report throws cold water on the notion that the labor market is improving. About 15 million people remain officially unemployed, and a record 9.5 million workers last month were in part-time jobs because they couldn't find full-time work or because their employers had cut back their hours.

"I think the recovery itself is in some danger," said Ron Blackwell, chief economist at the AFL-CIO, after reviewing the latest jobs report.

One major disappointment was the paltry job gains in the private sector, which amounted to even less than in each of the previous two months and were eclipsed by declines in public payrolls.

Surveys suggest that small businesses remain reluctant to add workers because of weak sales and uncertainty about future taxes and policies. Corporations are continuing to cut costs, in some cases by moving jobs overseas and, where possible, substituting labor with equipment and machinery.

"For most businesses I talk with, even if they're doing expansion, they're planning to do it with as few workers as possible," said Mark Vitner, a senior economist at Wells Fargo in Charlotte, N.C. "The economy just lacks a spark right now."

For much of this year, the month-over-month change in total jobs was distorted by big bursts of hiring and dismissals of temporary census workers. In September, the Labor Department said, the Census Bureau let go of 77,000 — nearly all the remaining staff brought on this year for the decennial population count.

But while that drop-off was expected, the big surprise was the loss of 76,000 jobs at local governments nationwide. Two-thirds of those were teachers, administrators and other staffers at public schools.

Not since September 1981 has the nation seen such large cuts by local governments in a single month.

State governments added to the woes by eliminating 7,000 jobs.

And private education services trimmed their payrolls by 15,000. All told, the hit to public- and private-sector education last month was 73,000 jobs.

"It's huge. We're cutting one of the key things related to future productivity growth," said Heidi Shierholz, an economist at the Economic Policy Institute.

Although the local education cuts in September were largely a one-time event, she said, layoffs of other workers at budget-strapped local and state governments are far from over.

The National League of Cities estimated that even with the September job losses, local governments were not halfway through the 480,000 layoffs projected to occur from last year through next year.

Besides hitting schoolteachers, the cuts were borne most severely by workers in public safety, public works and county social services, said Chris Hoene, the NLC's director of research.

"They're good middle-class supporting jobs that have good benefits and stability," he said, adding that their losses would be magnified because local governments buy goods and services from the community and work closely with local businesses.

As a rule of thumb, for every three local government jobs lost, one private-sector job also vanishes.

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