Unemployment stays at 10 percent in December, but job losses more than expected

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WASHINGTON
— The U.S. economy shed a larger-than-expected 85,000 jobs in December,
a disappointing finish to a year that saw more than 4 million positions
disappear, according to a government report Friday.

The unemployment rate last month held steady at 10 percent, but only because more people dropped out of the workforce.

The labor force, which consists of people employed
and those seeking work, shrank by a whopping 661,000 last month from
November. If that number had not fallen, the nation’s jobless rate
would have risen to 10.4 percent, said Lawrence Mishel, president of the Economic Policy Institute in Washington.

“Clearly, the continued erosion of jobs … and
workers abandoning the labor market in droves indicate we still have
severe and growing employment problems facing Americans,” he said.

Indeed, the latest jobs report showed that a rebound
in hiring has remained elusive, posing a serious threat to the
sustainability of the broader economic recovery and the political
fortunes of the incumbents in Washington.

Republican leaders seized on the report to attack
the Obama administration’s deficit spending and economic policies, as
they have throughout the last year, while liberal groups insisted that
this was not the time to pull back from stimulus programs aimed at
spurring job growth and helping the millions of unemployed Americans.

Either way, Chris Rupkey, an economist at the Bank of Tokyo-Mitsubishi, said: “The administration’s popularity is going to suffer if they don’t fix this problem quickly.” Christina Romer,
the president’s chief economist, acknowledged that the latest report
was a “setback.” But in a statement, she cautioned against reading too
much into one month’s data, which can be volatile, noting that the
employment trend seen over a longer time frame showed it was moving in
the right direction.

But the 85,000 jobs lost last month was much larger
than economists had projected, and it came after a very hopeful report
for November, when unemployment fell to 10 percent from 10.2 percent
and the amount of hiring across American finally seemed to be catching
up with the firings every month.

Employers began 2009 by eliminating 741,000 net
jobs, and the pace of layoffs had fallen steadily since then to a point
where there was virtually no change in total payrolls in November. In
fact, revised figures released Friday by the Bureau of Labor Statistics showed the economy added 4,000 jobs in November instead of losing 11,000 as previously reported.

That marked the first positive monthly job growth since December 2007.
And most analysts were projecting that last December’s jobs tally also
would be essentially unchanged, with some even forecasting that the
economy had generated a modicum of jobs last month.

But Friday’s report showed persistent troubles in
the construction and manufacturing industries, which have borne the
brunt of the job losses in the last two years.

In December, construction employers cut 53,000 jobs, and manufacturing added to the misery by eliminating 27,000 positions.

In the larger service-producing part of the economy,
job declines have eased more significantly, but most sectors are still
not adding net jobs.

Retailers overall cut 10,000 jobs last month, even
as they reported stronger-than-expected holiday sales this week.
Leisure and hospitality businesses gave up 25,000 positions, and
government payrolls shrank by 21,000.

The two major industries that added jobs over the
month were health and education, which expanded by 35,000; and
professional and business services, where employment rose by 50,000.

The latter category was boosted by the addition of
46,500 jobs in the temporary-help industry, which is considered a
harbinger of broader hiring and has been growing for the last several
months.

Another leading indicator of hiring, the average
weekly work hours in December was unchanged at 33.2, near a record low.
Some analysts were expecting the hours to tick up a bit, as employers
restore the hours that have been cut for many workers during the
recession.

But one stark statistic in the latest report is the
staggering number of people who dropped out of the labor force in
December and in prior recent months.

In December, the number of people working or looking
for work totaled 153.06 million. That is a decline of more than 1.5
million from December 2008. The last time there was an annual decline in the labor force was in 1951.

It’s not that the U.S. population is shrinking.
Prior to the recession, the labor force had been growing at about 1
percent a year, in tandem with the growth of the working-age
population. But the severe recession has prompted many discouraged
people to give up looking for work, and others are delaying entering
the work force by getting additional schooling or simply staying at
home.

The economy needs to create roughly 125,000 net jobs
a month to keep pace with the growing population and workforce, and
economists say it will take sustained growth of at least that many
payrolls monthly to make an appreciable dent in the unemployment rate.

Most forecasters believe it will take several years
to make up for the approximately 8 million jobs that have been lost
since late 2007, based on the latest figures and expected revisions to
be incorporated in next month’s report.

As of December, the official tally of unemployed
stood at 15.3 million. Of that number, a record four in 10 — or 6.1
million — have been unemployed for six months or longer.

The government’s alternative measure of unemployment
and underemployment, which includes involuntary part-time workers, rose
last month to 17.3 percent from 17.2 percent in November.

(c) 2010, Tribune Co.

Distributed by McClatchy-Tribune Information Services.