Economy Still Bleeding Jobs

By JUSTIN LAHART

Employers cut another 85,000 jobs last month, dashing hopes of a turnaround in employment, even as the U.S. economy grows.

With December's losses, there were 7.2 million fewer jobs than in December 2007, when the recession began. Although the unemployment rate was unchanged at 10% from November, that's only because many workers stopped looking for work and weren't counted in the numbers. A broader measure of unemployment, including those who have quit job hunting as well as those working part time because they can't find full-time work, remained about the same at 17.3% in December from 17.2% in November.
December's dismal job figures, reported by the Labor Department Friday, demonstrate that companies remain skittish about hiring even as their outlooks improve. Economic figures released so far suggest that gross domestic product -- the broadest measure of the value of goods and services produced by the economy -- grew at a 5.4% rate in the last three months of 2009, according to Macroeconomic Advisers, a St. Louis forecasting firm.
United Parcel Service Inc. raised its fourth-quarter earnings target Friday, but the shipping company also said it will cut 1,800 jobs.
"We've come to realize that with technology and management systems, we can manage larger geographic areas than ever before," said UPS spokesman Norman Black.

 

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Even once jobs come back, the unemployment rate may continue to rise. To keep up with a growing population, the economy needs to add about 100,000 jobs a month just to keep the unemployment rate stable.
Moreover, many people have stopped looking for work in response to the poor jobs environment. As a result, they don't show up in the Labor Department's tally of the unemployed.
In fact, a key reason why the unemployment rate didn't increase in December was that work force declined by 661,000. As a result, as the labor market improves, and people re-enter the work force and begin looking for work, the unemployment rate could rise.
Stocks edged higher Friday, with disappointment over the jobs report offset by expectations that the news would keep the Federal Reserve from raising rates. The Dow Jones Industrial Average rose 11.33 points to 10618.19.
The labor market isn't deteriorating nearly as quickly as in the first half of 2009, when it lost an average of 560,000 jobs a month. And most economists believe the economy will begin generating jobs within the next few months.
Nevertheless, the economy has been growing since the middle of 2009, and the fact that job losses have continued for so long points to a tepid recovery in the labor market. Revised figures showed that the economy added 4,000 jobs in November -- the first month of job gains since the recession began -- instead of the 11,000 job loss that was initially reported.

U.S. Unemployment: Historical View

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The Shifting Job Market

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Prior to the 1990s, the job market tended to recover alongside the overall economy after recessions. But in the recoveries that began in 1992 and 2001, jobs were slow to return. That was partly because firms facing increased global competition became even more focused on keeping costs down. Improved technology allowed companies to produce more with fewer workers. Rising profit margins and large productivity gains suggest that many companies are keeping tight control over labor costs -- one reason Federal Reserve officials believe that this recovery, too, will produce spotty job growth in its early stages.
"The employment picture overall has improved, and the outlook is certainly much brighter than one year ago," Eric Rosengren, president of the Federal Reserve Bank of Boston, said in a speech Friday. But he warned that "many firms are not yet ready to do new permanent hiring."
Lackluster job growth means downward pressure on wages and inflation and gives the Fed room to keep rates low. Manufacturers kept shedding jobs last month, though at a slower pace. Manufacturing payrolls fell by 27,000, compared with a drop of 35,000 a month earlier, the smallest loss in two years.
"We've gotten a little busier than six months ago, but it's nothing to be overly impressed with yet," said William Bachman, CEO of Bachman Machine Co. in St. Louis. The company, which makes plastic and metal parts mainly for the automotive industry, employs 89 workers, down from 125 a year ago.
Though Mr. Bachman believes business will continue to pick up, he doesn't expect to be hiring soon. "Not for the next three months, anyway," he said.

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“ Wow. I was expecting a slight gain, what with the seasonal hiring that usually takes place over the holidays. I am very apprehensive in regards to what January number will end up being. ”

— Jordan Martin

In the construction sector, hammered by the housing bust, the labor market worsened, with 53,000 jobs lost, compared with a November loss of 27,000. Nearly a third of the jobs lost were in the kinds of heavy-construction and engineering projects that much of the government's economic-stimulus efforts are directed at creating, said Michael Carey, an economist with Calyon Securities in New York. "It seems like it should be working the other way," he said.
Jeff Frankenfield's general-contractor business was growing by about 20% a year until October 2007. That's when "my phone stopped ringing," he says. "The consumer totally stopped spending money on remodeling." Now, instead of hiring and overseeing laborers to remodel homes in the San Francisco Bay area, he's doing such work himself, and earning about 30% less. "I kind of swallowed my pride because I need to pay bills," he says, adding that the competition for carpentry jobs is intense.
"People are shopping out the contractors," he says. "I did a job last year, a kitchen remodel, and the woman had nine estimates. Typically people get just two or three."
In brighter spots of the report, the temporary-help sector added workers for the fifth month, with 46,500 jobs gained. Gains in temporary employment often signal increases in overall hiring: Employers hire temps in the initial stages of recovery until they are confident the upturn will be sustained.
Tig Gilliam, CEO of Adecco North America, the largest staffing company in the U.S., said his firm is beginning to see more employers moving toward promoting temporary workers to full-time positions.
—Sarah E. Needleman, Jon Hilsenrath and Jennifer Levitz contributed to this article. Write to Justin Lahart at justin.lahart@wsj.com
Corrections & Amplifications:
Average hourly earnings rose to $18.80 from $18.77. An earlier version of this article incorrectly said average hourly earnings had risen from $18.74.