The Labor Department released its September jobs report this morning and the figure came in much more dire than previously forecasted. Employers eliminated 263,000 jobs last month and the unemployment rate rose to 9.8%, the highest since 1983.
Analysts polled by Reuters “had expected non-farm payrolls to drop 180,000 in September and the unemployment rate to rise to 9.8 percent from 9.7 percent” in August. The poll “was conducted before reports, including regional manufacturing surveys, showed some deterioration in employment measures.”
The weaker-than-expected number reinforces opinions of many Wall Street economists that the U.S. economy is far from a recovery and could revisit the recession. Until the jobs picture improves, sentiment and tone will remain in a bearish mindset.
Reuters reports that “since the start of the recession in December 2007, the number of unemployed people has risen by 7.6 million to 15.1 million, the Labor Department said. While the decline in payrolls has moderated from early this year, companies are still not hiring on a wide scale, likely waiting for a signal that the economic recovery is sustainable.”
“The employment situation continued to deteriorate,” Rich Yamarone, Chief Economist at Argus Research in New York, told Bloomberg News. “Given the crummy economic climate, businesses have no incentive to turn on the hiring spigots. We suspect the economy will make a turn for the worse.”
Many analysts are of the same opinion and continue to warn that a lack of hiring will have negative implications on discretionary spending and economic growth, thus forcing the United States into a double-dip recession. Even some government officials are trying to set expectations of a jobless recovery.
During Thursday’s testimony to the House Financial Services Committee, Federal Reserve Chairman Ben Bernanke said the economic expansion “may not be strong enough to ‘substantially’ bring down unemployment.”
In addition to the non-farm payrolls report, the Labor Department also published its preliminary estimate for the annual benchmark revisions to payrolls that will be issued in February 2010. According to Bloomberg, the revisions showed the economy may have lost an additional 824,000 jobs in the 12 months ended March 2009. Currently, the data shows a 4.8 million drop in employment during that time.
Bloomberg reports, “The projected decrease was three times larger than the historical average, the Labor Department said. Most of the drop occurred in the first quarter of this year, probably due to an increase in business closings, the government said.”
Looking forward, many on Wall Street predict unemployment to jump into the double digits. Economists surveyed by Bloomberg last month projected the unemployment rate will reach 10% by late 2009 and average 9.7% for all of next year. The economy is expected to grow an average 2.6% in the second half of this year, and 2.4% in 2010.
Fed chief Bernanke also said during yesterday’s testimony that he anticipates the jobless rate will hold above 9% through 2010.
Bloomberg News added that while acknowledging that “economic activity has picked up,” Fed policy makers on Sept. 23 said household spending “remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit.”
All of these descriptions are expected to threaten any hopes of improving the jobs picture.
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