Ray of hope in bad job numbers: crisis may be flattening out

WASHINGTON — A fifth consecutive monthly report showing steep job losses served as a grim reminder Friday of how bad things are in the U.S. economy, but also offered a glimpse of hope that the worst may soon be over.

Employers shed 663,000 jobs in March, pushing total U.S. jobs lost in this recession above 5 million and the unemployment rate up four-tenths of a percentage point to 8.5 percent, the Labor Department reported Friday.

While steep, the March job losses were consistent with what mainstream economic forecasts had suggested, providing a measure of relief that things aren't worse than expected. That, and the fact that February's job losses weren't revised downward, as previous months' reports had been, suggested that layoffs may be flattening out.

"I think that after months and months of getting worse-than-expected news, our expectations are in line now with where the economy is. As hard as it is to believe, it is a sign that things are getting better," said Mark Vitner, senior economist with Wachovia. "We think the worst may be behind us. Job losses are going to remain very large for the next few months, but they should begin to moderate."

One reason for optimism amid the gloom is that other indicators point to improvement, even if full-scale economic recovery remains distant. These include better-than-expected news on February orders of durable goods, which are big-ticket expenditures; stable retail-sales numbers; falling mortgage rates; a 20 percent gain in the stock market over the past month; and a steep drop in volatility in credit markets.

The scattered indicators are rays of light that have been missing since at least last September. Until the past few weeks, Vitner noted, the news was all bad.

That's not to minimize the pain that's still being felt.

"For the second month in a row, the headline employment decline didn't meet the worst fears, but this is still a very weak report," Nigel Gault, the chief U.S. economist for forecaster IHS Global Insight, wrote in a research note to investors. "The latest figures show job losses of 650,000 or above for each of the last four months."

Since jobs are a lagging indicator, the struggling U.S. economy will continue to shed them even after a turnaround has begun. Many economists think that the unemployment rate could top 10 percent this year, even if economic conditions begin to improve, as some indicators are starting to suggest.

"Since the recession began in December 2007, 5.1 million jobs have been lost, with almost two-thirds (3.3 million) of the decrease occurring in the last five months," the Bureau of Labor Statistics said. "In March, job losses were large and widespread across the major industry sectors."

Although it left its February job-loss estimate intact at 651,000, the BLS revised January's initial estimate of 655,000 to 741,000, well above March's 663,000 lost jobs.

Manufacturers trimmed another 161,000 jobs in March; factory employment has fallen by 1 million over the past six months, the BLS said.

Construction, both residential and commercial, remains in the dumps, and builders axed another 126,000 jobs last month. The new twist is that commercial construction is beginning to suffer just as residential construction was hit last year.

"Unlike previous periods in this economic cycle, the bulk of job losses for the first quarter of 2009 were in the nonresidential sector as opposed to the residential sector," wrote Anirban Basu, the chief economist for Associated Builders and Contractors, an industry group. "This suggests that the residential construction sector is much closer to its bottom than is the nonresidential construction sector, which is a relative newcomer to the ongoing downturn."

The government's economic-stimulus spending should begin to ease some of the pain in the construction sector by spurring infrastructure projects by late this year, Basu said in an analysis of the March job numbers.

Employment in professional and business services ranked not far behind manufacturing in lost jobs, falling by 133,000 last month. More than half those losses came in temporary help services.

The BLS report highlighted this troublesome trend affecting temp workers.

"Among the unemployed, the number of job losers and persons who completed temporary jobs increased by 547,000 to 8.2 million in March. This group has nearly doubled in size over the past 12 months," the agency said.

Elsewhere in the report, statisticians noted that the number of people who are working part time for economic reasons — sometimes referred to as involuntary part-time workers — climbed by 423,000 in March to 9.0 million.

In a series of measures of underutilization of the labor force — called the U-series — the BLS statisticians determined that 15.6 percent of people in the U.S. work force now are unemployed, working part-time because they can't find full-time work or are marginally attached to the work force, meaning that they're not looking for jobs but are available to work. That's up by 3 percentage points since November.

Retail trade employment fell by 48,000 last month, while the financial services sector shed another 43,000 jobs. Leisure and hospitality lost another 40,000 jobs, while transportation and warehousing lost 34,000.

The federal government and the Federal Reserve have taken a number of steps, from stimulus spending to lowering borrowing costs and mortgage rates, that should revive the troubled economy eventually.

"As best we can tell, so far the programs are having the intended effect. For example, 30-year fixed mortgage rates . . . have declined 1 percentage point to 1 { percentage points since . . . November," Fed Chairman Ben Bernanke said in a speech Friday. "Over time, lower mortgage rates should help to improve conditions in the housing market, whose persistent weakness has had a major impact on economic and financial conditions more broadly, and will improve the financial condition of some households by facilitating refinancing."

Most economists expect a turnaround by late this year, and a smaller number expect a sharp rebound.

"By year end, growth should be positive again, perhaps as strong as 4 percent (annual rate). Large pools of 'pent-up demand' are forming and will soon begin to be transformed into actual spending," William Dunkelberg, the chief economist for the National Federation of Independent Business, a group composed of small businesses, wrote Friday.

Americans are enjoying an "oil tax cut," he said, pointing to the steep drop in fuel prices.

Businesses large and small have liquidated inventories and reduced spending. Once the first signs of economic revival appear, businesses will increase orders, and the negative cycle of declining jobs leading to less spending leading to fewer jobs will reverse into a positive cycle. Rising sales will lead to rising employment, leading to more sales and more employment.


BLS report

Alternative measures of labor underutilization


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