By Don Miller
Employers cut 539,000 jobs in April, the lowest total in six months, but the Labor Department said the unemployment rate still soared to 8.9%, from 8.5% in March. While some analysts viewed the latest report as a sign of a nascent economic recovery, the unemployment numbers are almost certain to head higher before the recession is declared over.
Last week’s report could have been worse if the numbers hadn’t been held in check by a burst of federal government hiring of temporary workers to prepare for the 2010 Census.
The report was also skewed by the way the government categorizes the unemployed. As Money Morning previously reported, if laid-off workers who have given up looking for new jobs or have settled for part-time work are included, the numbers skyrocket.
In fact, if the latest unemployment report had included those workers, the rate would have soared to 15.8% in April, the highest on records dating back to 1994. The total number of unemployed now stands at 13.7 million, up from 13.2 million in March.
The data released Friday wasn't as high as the 620,000 job cuts that economists were expecting, but the payroll figures for March and February were revised to show 66,000 more job losses than previously reported.
The report showed job losses across almost all sectors of the economy, but at a slower pace than previous months. The manufacturing sector lost 149,000 jobs in April, after cutting 167,000 the prior month. Construction industries cut 110,000 jobs after shedding 135,000 in March.
The service industry, responsible for roughly 90% of economic activity lost 269,000 jobs after eliminating 381,000 in March.
The one bright spot was government hiring, with public payrolls soaring by 72,000 after the U.S. Census Bureau began hiring 140,000 temporary workers last month to produce the population count that comes once every 10 years. It will hire more than 1.4 million people to conduct the survey over the next year.
Even though unemployment rolls are now at the highest level since September 1983, many analysts believe the numbers signaled the economy's steep decline may be easing.
“We appear to have passed the point of the most severe job losses,” Dean Maki, co-head of U.S. economic research at Barclays Capital PLC (ADR NYSE: BCS) in New York told Bloomberg News. “It’s still a weakening labor market but it’s weakening less fast. There are a few headwinds to growth, and a recovery will” likely be “modest.”
The worst financial crisis since the 1930’s has taken a steep toll on U.S. workers and companies, and most economists expect the unemployment numbers will get worse as the housing, credit and financial sectors sort out the mess. The jobs numbers usually don’t rebound until well after an economic recovery begins.
Government “stress tests” to determine whether 19 of the largest U.S. banks had enough capital to weather further economic turmoil used an “adverse scenario” that included an average unemployment rate of 8.9% in 2009 and 10.3% next year. But economists projected in an April survey that the jobless rate would rise to 9.5% by year-end, Bloomberg reported.
In the coming months, economists expect job losses to continue for most — if not all — of this year. But some are hopeful the cuts won't be as deep.
"There are glimmers of hope. We are moving in the right direction in terms of layoffs. They are measurably less bad than what we've been through," Mark Zandi, chief economist at Moody's Economy.com, told the Associated Press.
The biggest impact of job losses on the economy is the threat to consumer spending, the engine that drives 70% of Gross Domestic Product (GDP). After a first-quarter rebound, Americans could retrench again this quarter before spending shows sustained gains in the second half of 2009, according to economists surveyed by Bloomberg last month.
Joel Naroff of Holland, Pennsylvania-based Naroff Economic Advisors, thinks the numbers will be good for consumer confidence, which should help spending. In a note to investors, Naroff said the unemployment numbers are the latest in a long string of good news/bad news economic reports.
“This is a truly awful report that will likely be taken as a good report because the job losses have slowed,”he said. “As long as we continue to see the silver lining in the black clouds that overhang the data, then confidence will build. It does look as if we are falling more slowly and we are likely to hit bottom reasonably soon, at least as far as economic growth,”
The job cuts continued this week as steelmaker Severstal International (MCX:) said it's shutting plants in Wheeling, W.Va., and Warren, Ohio, forcing 3,100 layoffs due to the pullback in the steel industry.
E.I. duPont Nemours & Co. (NYSE: DD), the third-biggest U.S. chemical maker, plans to eliminate an additional 2,000 positions, while Microsoft Corp. (NASDAQ: MSFT) started laying off some of the 5,000 job cuts it announced earlier this year and left the door open for more in the future.
“We will continue to closely monitor the impact of the economic downturn,” Microsoft Chief Executive Officer Steve Ballmer said in a e-mail obtained by Bloomberg News. Redmond, Washington-based Microsoft will, “if necessary, take further actions on our cost structure including additional job eliminations.”
News and Related Story Links:
U.S. Job Losses Slowed as Economy Began to Stabilize
U.S. Unemployment May be a Bigger Problem Than Government Statistics Say
Layoffs slow, but companies still wary of hiring
Naroff Economic Advisors:
April Unemployment Report