The improving jobs picture took a turn for the worse this morning when the Labor Department released its monthly nonfarm payrolls report along with the current unemployment rate. Both data points reported much higher than consensus, thus extinguishing any renewed optimism about job creation during the economic recovery.
The government reported that the U.S. unemployment rate reached 10.2%, far above a Wall Street consensus of 9.9%. The report also showed that employers cut 190,000 jobs in October, more than the 175,000 markets had expected. The lone highlight was found in the revisions for August and September, which showed 91,000 fewer jobs lost than previously reported.
“The rise in the unemployment rate is very ugly,” Ethan Harris, chief U.S. economist at Bank of America Merrill Lynch, said in an interview with Bloomberg Television in New York. “This is a big backward step to get this high of an unemployment number this early in the recovery.”
Today’s report comes as a surprise, particularly since it was released on the heels of last week’s Gross Domestic Product report showing the economy grew by 3.5% in the third quarter. In addition, positive independent reports from Challenger and ADP released this week provided reason to believe today’s report would beat consensus estimates.
The jobs report will add even more pressure on the Obama administration to cultivate a strategy for stimulating employment in the country. Yesterday, Congress did act by voting overwhelmingly to extend unemployment benefits by up to 20 weeks. As CNNMoney reported this morning, “there are now a record 5.6 million people who have been unemployed for six months or longer, as the average time an unemployed person has been out of a job hit 26.9 weeks.”
“The unemployment rate of 10.2 percent is problematic because it gives a sense of urgency to Washington, DC. Washington will be looking for any increase in stimulus,” said Tom Sowanick, co-president and chief investment officer at Omnivest Group, to Reuters.
The deteriorating jobs picture during what is supposed to be an economic recovery is quickly becoming a political hot potato in Washington. Americans are nervous and losing confidence in lawmakers to reverse this trend, and it showed this week during some key regional elections taking place around the country.
As Reuters reports:
Mounting unemployment could pose problems for the Democrats who control Congress as they head into congressional elections in November 2010. This week, Republicans wrested control of two state governorships away from Democrats in races where the weak economy figured prominently.
Political affiliation withstanding, Capitol Hill lawmakers will want to work together to develop a real plan for job growth. Knowing that 70% of gross domestic product comes directly from the American consumer, Americans will have to work if companies expect them to spend. The U.S. economy cannot sustain itself from a jobless recovery.
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