TOPICS > Economy

Unemployment Hits 26-Year High Despite Economic Growth

November 6, 2009 at 5:27 PM EST
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The U.S. Labor Department announced that unemployment jumped to over 10 percent on Friday, the highest it's been since 1983. Jeffrey Brown talks to an economist for more.
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JUDY WOODRUFF: The other main story of the day was unemployment hitting double digits for the first time since 1983. The U.S. Labor Department announced the jobless rate rose to 10.2 percent in October, up four-tenths. The economy lost another 190,000 jobs last month.

At a congressional hearing, though, the head of the Bureau of Labor Statistics said the rate of job losses is slowing.

KEITH HALL, commissioner, Bureau of Labor Statistics: The last three months, the loss has been more moderate than the prior three months are or the prior six months before that. The last three months, job losses averaged 188,000. That is significantly lower than the unprecedented period, six-month period where we lost about 645,000 jobs per month. It’s less widespread, the job loss.

JUDY WOODRUFF: The commissioner said it might take three years to get back to employment levels before the recession.

And President Obama said it underscored the need for extended unemployment benefits. He signed those into law today. On Wall Street, the reaction was subdued. The Dow Jones industrial average gained 17 points, to close at 10,023. The Nasdaq rose seven points, to close at 2,112. For the week, both the Dow and the Nasdaq gained more than 3 percent.

Jeffrey Brown takes a closer look at the jobs story.

JEFFREY BROWN: And for that, joining me is Lakshman Achuthan, an economist and managing director of the Economic Cycle Research Institute in New York City.

Well, the expectation of hitting 10 percent had been there, but what did today’s report reveal about the depths of the problem. Let’s start with the troubling news that’s still out there.

LAKSHMAN ACHUTHAN: Well, this was quite a shocking number, I mean, at 10.2 percent, and I think a lot higher than anybody expected.

And when we look at broader measures of unemployment that include discouraged workers or people who have left the work force, the numbers go even higher. They are at 17, 17.5 percent — so, on that score, very, very bad.

But the direction, the fact that it is going up, as you mentioned, is not a surprise. That is something that happens always in the early stages of recovery. And this recovery is no different on that score.

Job loss beginning to slow

Lakshman Achuthan
Economic Cycle Research Institute
People who have not lost their jobs are a little less or even, you know, significantly less fearful of losing their jobs today than they were at the beginning of the year.

JEFFREY BROWN: So, the possible good news would be that the rate of loss continues to slow?

LAKSHMAN ACHUTHAN: Well, that, certainly. We're now, you know, below losing 200,000 a month. And, at the beginning of the year, it was well over 600,000. It was around 700,000 a month. So, that has a -- as big of a psychological impact, as it were, on the positive side, as, say, crossing the 10 percent unemployment rate does on the negative side.

And what I mean by that is that the people who have not lost their jobs are a little less or even, you know, significantly less fearful of losing their jobs today than they were at the beginning of the year. And that is very helpful for the sustainability of the recovery.

JEFFREY BROWN: Well, I do want to ask you about psychology. I mean, crossing that 10 percent, going into double digits, how -- how does that play out in terms of consumer confidence, of course, for those who don't have jobs? But expand a little bit on what you were starting to say about even for those who do. We are entering the shopping season, you know, the -- the role of the consumer in driving the economy.

Talk about this as a psychological factor.

LAKSHMAN ACHUTHAN: Well, look, going above 10 percent, we knew it was going to happen. It is a negative, because it reminds us that we have just finished the greatest recession since World War II. And that's not anything you want to really remember too -- too, too closely.

Now, for these -- the power of these numbers, there's a lot of angst when -- when the number occurs. And -- and, maybe, in some sense, it's kind of good that we got the waiting over with, and now we are above 10 percent. The same kind of angst is going on, by the way, with another number 10, you know, the Dow 10000, where we have been popping back and forth across that threshold for the last couple of weeks.

And we see that we are staying above, so far, the 10000 mark. There is a kind of wall of worry that goes on in terms of the psychology of investors and employers in the early stages of recoveries, where the -- the human nature is to kind of extrapolate the recent bad trends.

And, so, for the last, you know, almost two years, things have been pretty bad. And, so, your nature -- your nature, the human nature, is to extend that into the future. However, when a business cycle is turning, the trend is breaking. You're going -- the cycle, the dynamic, the process of what is going on in the economy is shifting direction.

And we're seeing that through objective data, objective leading indicators and other data like GDP, which show the economy turning.

JEFFREY BROWN: One of the -- the numbers that got some attention in today's report is the rise in temporary workers. Now, explain -- explain that, the importance of that.

Temporary jobs a positive sign

Lakshman Achuthan
Economic Cycle Research Institute
When you see temporary hiring rising, it's a leading indicator of permanent job growth down the line.

LAKSHMAN ACHUTHAN: Very important.

You have -- employers are unsure of the durability of the recovery. They had to deal with an economy that grew by 3.5 percent, by all measures, in the third quarter. And they did that with seven million or so less people working.

So, everybody who was remaining on the job had to be a great deal more productive in a way that is actually unsustainable. So, business employers, not wanting to take the plunge and commit to a new employee, did as little as they could, which is to hire a temporary employee.

And that's why, when you see temporary hiring rising, it's a leading indicator of permanent job growth down the line. However, I don't want to make too much of it too soon. There's a big deal between recovering, being in recovery, which is where we are now, and being recovered.

I heard in the lead-in there was an estimate that we may be able to get the jobs that we have lost in this recession back in three years. That's pretty optimistic. We would be having to have an economy much like the 1990s economy, which was -- was relatively strong.

And, even at that pace, it would take about four years to get back the jobs that we have lost.

JEFFREY BROWN: Well, I know everyone is trying to calculate when the -- when the jobs picture gets better.

LAKSHMAN ACHUTHAN: Yes.

JEFFREY BROWN: And we will continue to follow.

Lakshman Achuthan, thank you very much tonight.

LAKSHMAN ACHUTHAN: Thank you.