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Unemployment rate falls but U.S. economy remains sluggish

The U.S. jobless rate drops to 9% from 9.1% in October, but employers added just 80,000 positions, fewer than expected. Many of the employment gains are coming in the low-paying service sector.

November 05, 2011|By Alana Semuels, Los Angeles Times
  • A sign marks the entrance to a job fair in New York.
A sign marks the entrance to a job fair in New York. (Shannon Stapleton / Reuters )

The good news for the U.S. economy is that a double-dip recession looks increasingly remote. The bad news: It can't seem to get out of first gear.

Employers added just 80,000 jobs in October, about 20,000 less than economists expected, and far fewer than the 125,000 jobs needed to keep pace with population growth and younger adults joining the labor force. The unemployment rate slipped to 9% from 9.1% the month before, the Bureau of Labor Statistics said Friday, but the rate is still double what it was five years ago.

"We are on the path to recovery, but to regain the 8.5 million jobs that we lost is going to be a long way down the road," said Esmael Adibi, an economist at Chapman University.

Fears of another recession swelled this summer after economic growth slowed to a crawl in the first half of the year and the government reported that employers' payrolls did not grow in August.

Growth picked up again in the third quarter, however, and the government Friday raised its estimate of the number of jobs added in August and September by a combined 102,000, after a previous upward revision.

"I don't think there's any signs of recession in this report," said Ryan Sweet, senior economist at Moody's Analytics. "The labor market isn't booming, but I don't think there's any signs that we're going to take a sizable step back."

Although the economy may not be shrinking, there are some concerns about the way it is growing. Many of the employment gains are coming in the low-paying service sector, continuing a long-running trend that was exacerbated by the 2007-09 recession.

The leisure and hospitality sector, which added 22,000 jobs, pays about $13 an hour on average, for example. Retail trade grew by 17,800 jobs, and pay levels there average $16 an hour.

By contrast, manufacturing, which remains sluggish after a strong start earlier this year, pays average wages of $24 an hour, according to government data. That sector added just 5,000 jobs last month after shedding positions the previous two months.

If a trend toward services and away from manufacturing continues, the nation will be stuck in a vicious cycle: It needs strong consumer demand to get the economy moving again, but demand will remain flat without higher-paying jobs.

And without a strong manufacturing sector, the nation's trade deficit is likely to worsen. The U.S. trade deficit with China hit a record high in August at $29 billion.

"Now that we seem to be in the phase of globalization where there is growing concern about persistently high levels of unemployment, there is now a reassessment about whether an industrialized economy can survive just on the service economy alone," said John Bowler, an economist with the Economist Intelligence Unit.

Communities that long relied on a solid manufacturing anchor are having a hard time adjusting to the new reality.

Patricia Harker, 51, of Pontiac, Mich., lost her job making vehicle door panels four years ago when the factory where she worked downsized.

Since then, she's tried without luck to find work at a store or restaurant in town. Harker lives on a street of condemned homes and says she's barely holding on to her own.

"There's no work in Michigan," she said. "My lights were shut off today, I'm about to lose my house, every day it's something."

Some of those lucky enough to find a job say they're still struggling to get on their feet.

They include Jennifer Raynor, 43, of Ocala, Fla., who in January started a $10-an-hour job as a network administrator at a computer company. Although she went back to school to get an associate's degree during the slow economy for better employment prospects, Raynor now makes less than she did in her pre-recession job as an electrician.

"I guess employers can't afford to pay right now," said Raynor, who is thinking of looking for part-time work to supplement her income.

The two hardest-hit sectors in October were construction, which lost 20,000 jobs, and government, which dropped 24,000.

Still, there were some bright spots in Friday's report. The household survey — a separate questionnaire that asks households, rather than employers, about jobs — showed there were 277,000 more people employed in October than September, the third month of strong growth. The household survey is used to calculate the unemployment rate but is less reliable in counting jobs data.

Employment services, which include temporary help companies, added 14,400 positions in the month. Companies often hire temporary workers before they decide to spend money on new hires, and an uptick in temp hiring can be a sign that more full-time positions are coming soon.

The average workweek for production employees at private companies grew 0.1 hour in the month.

That path to recovery should continue, barring any more major turmoil in Europe or in any of the nation's other major trading partners, said Nigel Gault, an economist with IHS Global Insight.

And economists take heart in the fact that although economic growth is slow, at least it is on an upward trajectory. So far this year, the U.S. has added 1.3 million jobs, compared with the 695,000 jobs the economy had added by this time last year — and the 5 million it lost in 2009.

June Boerger is opening two restaurants in Bakersfield after seeing business at her first restaurant, the Orchid, pick up in recent months. She's hiring servers and cooks, and says the holiday season should help speed sales — if customers don't retreat once again.

"I just hope everybody doesn't feel like the economy is bad," Boerger said. "If the economy goes down, you have to be strong and go for it."

alana.semuels@latimes.com

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