US jobless rate reaches 8.9%

US jobless rate reaches 8.9%
By Alan Rappeport in New York
Copyright The Financial Times Limited 2009
Published: May 8 2009 14:11 | Last updated: May 8 2009 16:58
http://www.ft.com/cms/s/0/8d75e86a-3b5c-11de-ba91-00144feabdc0.html



US unemployment climbed to 8.9 per cent in April, the highest level since 1983, as the recession continues to savage the labour force, official figures revealed on Friday.

The latest non-farm payrolls data showed that another 539,000 jobs were lost in April compared with a revised 699,000 the previous month. It was the smallest monthly loss total since last October.

In all, 5.7m jobs have been culled since the recession began in December 2007 and 13.7m people are currently unemployed.

The results, while grim by historical standards, were better than economists’ predictions that 610,000 more jobs were lost last month. They offer some evidence to back up the “green shoots” theory that economic prospects are starting to improve. However, the March revision muted some of that enthusiasm.

“This is less bad than the 690,000 average in February and March, and both manufacturing and service losses slowed, but it is hardly a triumph or even a stabilisation,” said Ian Sheperdson, chief US economist at High Frequency Economics.

Manufacturing jobs fell by 149,000 in April and construction employment dropped by 110,000. In the services sector, professional and business services lost 122,000 jobs and retailers shed 47,000. Blunting the losses were education and health services , which added 15,000 jobs, and government employment, which rose by 72,000, driven by new temporary hires for the 2010 US census.

Average hourly earnings last month rose by 1 cent to $18.51. On the year wages have grown by just 3.2 per cent in April, a 40-month low.

Unemployment was most concentrated among adult men, blacks and Hispanics, which had jobless rates of 9.4 per cent, 15 per cent and 11.3 per cent, respectively. The broader “U-6” measure of unemployment, which accounts for those working part-time for economic reasons, has now reached 15.8 per cent.

After the results were released US stocks rose, with the benchmark S&P 500 index gaining 1.5 per cent to 920.61 points in early trading and the Dow Jones Industrial Average rose 1.3 per cent to 8,516.10 points. Meanwhile, the yield on the two-year Treasury note fell 2 basis points to 0.971 per cent while that on the 10-year note lost 4bp to 3.291 per cent.

Recent figures have prompted cautious optimism among some US politicians, including President Barack Obama, who said last month there were ”glimmers of stabilisation” in the economy. Mr Obama acknowledged on Friday that the recession will be “months or even years in the unmaking” and that job losses would continue to mount.

“While it’s somewhat encouraging that this number is lower than it’s been in each of the past six months, it is a sobering toll,” Mr Obama said.

On Tuesday Ben Bernanke, chairman of the Federal Reserve, said demand in the US ”may be stabilising”, but noted that job creation could lag economic growth because companies will be cautious about hiring.

Many analysts had lowered their forecasts ahead of Friday’s report after a raft of better-than expected data raised hopes that the rate of job losses is starting to abate.

On Thursday the labour department’s measure of new jobless claims eased to the lowest level since January. The ADP employer services which showed that the US private sector shed 491,000 jobs in April – a historically high figure, but a sign that the free-fall is slowing.

Earlier in the week the Institute of Supply Management’s jobs index revealed that employment activity rose by 4.7 per cent last month. Meanwhile Challenger, Gray & Christmas, an outplacement consultancy, showed the number of job cut announcements eased last month.

Economists have been hopeful that unemployment has reached a trough for the cycle but remain wary of the “jobless recoveries” experienced during the recessions of 1992 and 2002, when job creation lagged a return of economic growth. However employment and growth tend to reinforce each other.

“A return to marginally positive economic growth would be difficult if not impossible to achieve without a material slowing in the rate at which jobs are being extinguished,” note Jan Hatzius and Ed McKelvey, economists at Goldman Sachs.

They predict that payrolls will be falling at a monthly rate of 100,000 by the end of the year as economic growth stabilises. The US Congressional Budget Office projects that the unemployment rate will peak at 9 per cent this year before reversing in 2010.

Additional reporting by Kiran Stacey