Little light at end of U.S. unemployment tunnel
Unemployment in the United States, deeply entrenched and painfully high, appears set to continue for years amid sluggish economic growth too weak to bring it down, new data shows.
After a steep recession, the world’s biggest economy is growing nowhere near enough to compensate for population growth that swells the workforce, let alone reduce the number of unemployed from 14 million.
The jobless rate has been stuck at 9.0 percent and above for all but two of the past 29 months.
On Friday, when the government releases its job market data for October, that is not expected to change: Analysts are forecasting the jobless rate will remain at 9.1 percent for the fourth straight month, despite efforts by policymakers to encourage more hiring.
With Europe’s debt crisis escalating, threatening global growth, the high US jobless rate undercuts the economy’s resilience against external shock.
And it presents a challenge to President Barack Obama, whose $447 billion jobs creation bill is stalled in a gridlocked Congress, where Republican foes oppose new stimulus spending in the face of growing deficits.
There was little encouragement for a more optimistic view from Wednesday’s data.
Private payrolls firm ADP reported that US companies added 110,000 net jobs last month, down from 116,000 in September.
“This is in line with previous month’s reading and suggests a steady but unimpressive pace of job creation in the official nonfarm payrolls report on Friday,” said Vassili Serebriakov at Wells Fargo Bank.
ADP said the October jobs growth was entirely due to the massive service sector and small and medium-sized businesses. Big businesses shed 1,000 jobs.
“It was another in a long line of mediocre payroll numbers,” said Joel Naroff of Naroff Economic Advisers.
“It was nice to see that the service sector added workers but not so positive was a small decline in the manufacturing sector,” Naroff said.
According to ADP, the service sector added jobs for the 20th consecutive month, but the number fell by 8,000 to 114,000.
Ian Shepherdson, chief US economist at High Frequency Economics, warned that private-payroll growth was “still not even fast enough to keep unemployment from rising further in the medium-term, never mind bringing it down.”
Most analysts estimated that Friday’s Labor Department report, which includes both private-sector and public-sector data, will show the economy spawned a total of just 85,000 net nonfarm jobs in October, down from 103,000 in September.
Private-sector jobs were forecast to fall by 20,000, to 117,000.
The Federal Reserve released Wednesday its newest forecasts, which predict the unemployment rate will fall to no better than 8.5 percent by the end of 2012, compared with its June prediction of 7.8 percent.
The Fed also cut its gross domestic product growth forecast for 2012, to 2.5-2.9 percent, not seen as strong enough to generate large numbers of jobs.
Another report released Wednesday, by global outplacement firm Challenger, Gray & Christmas, showed planned job cuts by US-based employers plummeted 63 percent in October after hitting a 28-month peak the prior month.
Despite the improvement, the number of layoffs in the first 10 months of the year was 16 percent higher than the same period last year.
“Meanwhile, the European debt crisis is wreaking havoc on Wall Street,” said John Challenger, the firm’s chief executive.