The unemployment numbers reported by the Labor Department Friday are proof that despite recent optimism about the job market, the economy is still trudging through a jobless recovery. And it doesn't look like the labor picture will improve anytime soon, either.
Employers unexpectedly shed 85,000 jobs in December, displaying a lack of confidence in the economic recovery and leaving the "official" unemployment rate at 10%.
However, the real rate of unemployment — which includes part- time workers who want full-time jobs and people who want work but have simply stopped looking — rose to 17.3% from 17.2%.
That number was mirrored by a steep drop of 661,000 jobs, showing that more of the unemployed have given up on their search for work. Once people stop looking for jobs, they are no longer counted in the "official" unemployment numbers.
"That tells me that Main Street doesn't believe there's a recovery yet, because they're not out looking for jobs yet," Jonathan Basile, an economist at Credit Suisse (NYSE: CS) told MSNBC.
And even though the November report was revised to show a gain of 4,000 jobs instead of the previously reported 11,000 decline, most economists are worried that 2010 doesn't hold much promise for jobless workers. Economists surveyed by Bloomberg last month projected the jobless rate will exceed 10% through the middle of this year even as the economy expands 2.6%.
"There's still a bit of caution in hiring by businesses," Michael Moran, chief economist at Daiwa Securities America Inc. in New York told Bloomberg. "There were some positive things in the revisions to the prior month, but in general we're still in adjustment mode in the labor market."
In fact, as Money Morning reported last month, 16% of small-business owners surveyed by the National Federation of Independent Business said they are planning to cut jobs in the next three months – nearly double the number of those planning to add jobs.
"The ‘job generating machine' is still in reverse," the federation said.
And consumer spending, which accounts for 70% of economic activity, is likely to remain subdued, as Americans continue to nurse a hangover from a recent spending binge that was fueled by credit cards and home equity loans.
In a second round of efforts to cut the jobless rate, President Barack Obama on Dec. 8 announced $170 billion in proposals to create more jobs with additional spending on the nation's transportation system, tax credits to spur hiring by small businesses and incentives to make homes more energy efficient.
In early 2009, Congress passed the President's $787 billion stimulus plan, which the administration's economic advisers had forecast would keep a lid on unemployment at 8%.
Yet another government program will soon offer a glimmer of hope when the Census Bureau hires 1.15 million temporary workers in the first half of the year to conduct the once-every-decade population count.
Economist Lori Helwing at Bank of America Corp's (NYSE: BAC) Merrill Lynch Global Research unit in New York told Bloomberg that Census Bureau hiring may boost payrolls by a peak of 700,000 in May before those workers begin to be let go in June.
"They're going to hire an army of people," Julia Coronado, a senior economist at BNP Paribas (ADR OTC: BNPQY) in New York told Bloomberg. "In some sense, this acts as a stimulus package and is a timely coincidence, coming so early in the recovery."
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