Jobless number ‘sobering'

WASHINGTON — Just when it was beginning to look a little better, the economy relapsed Friday with a return to a double-digit unemployment rate for only the second time since World War II and warnings that next year will be even worse than previously thought.

The jobless rate rocketed to 10.2 percent in October, the highest since early 1983, dealing a psychological blow to Americans as they prepare holiday shopping lists. It was another worse-than-expected report casting a shadow over the struggling recovery.

President Barack Obama called it 'a sobering number that underscores the economic challenges that lie ahead.' He signed a measure to extend unemployment benefits and to expand a tax credit for homebuyers.

Economists had not expected the 10 percent mark to come so quickly and immediately darkened their forecasts. Mark Zandi, chief economist at Moody's Economy.com, and Joshua Shapiro, chief U.S. economist at MFR Inc., predicted the rate will peak at 11 percent by mid-2010. They earlier had projected 10.5 percent.

Unemployment at 11 percent would be a post-World War II record. Only once since then has joblessness hit double digits in the United States — from September 1982 to July 1983, topping out at 10.8 percent.

'It's not a good report,' said Dan Greenhaus, chief economic strategist for New York-based investment firm Miller Tabak & Co. 'What we're seeing is a validation of the idea that a jobless recovery is perfectly on track.'

The Labor Department, using a survey of company payrolls, said the economy shed 190,000 jobs in October. A separate survey of households found 558,000 more people were unemployed last month than in September. Some 15.7 million Americans are out of work.

The survey of companies doesn't count the self-employed and undercounts employees of small businesses. So the economic picture could be even more dire.

And the unemployment rate doesn't include people without jobs who have stopped looking, or those who have settled for part-time jobs. Counting those people, the unemployment rate would be 17.5 percent, the highest since at least 1994.

Economists had expected unemployment to rise to no more than 9.9 percent, up just a tick from September's 9.8 percent, and the surprising jump added to fears that the recovery could fizzle if Americans don't spend.

'This is a situation where the recovery balloon is getting off the ground but might not have enough power to keep rising,' said Brian Bethune, economist at IHS Global Insight.

Sitting at a St. Louis unemployment center, Paul Branyon, who was laid off in July from a Williams-Sonoma factory in Tennessee and now lives with relatives, shook his head and laughed at the notion that the recession is over.

'It's getting actually harder right now,' the 26-year-old said. 'It seems like everywhere you go, people are losing jobs. People are cutting back. So it's going to get harder before it gets easier.'

The worst recession since the 1930s may be over — the economy actually grew from July to September for the first time in a year — but the recovery isn't expected to be strong enough to stem job losses and get businesses hiring again. And the unemployed are staying out of work longer. The count of people jobless for six months or longer stands at a record 5.6 million.

October was the 22nd straight month the U.S. economy has lost jobs, the longest on record dating back 70 years. Losses at factories, construction companies, retailers and financial services companies far outweighed gains in education and health care, professional and business services and elsewhere. Government payrolls were flat.

One sign of hope: Temporary employment grew by 33,700 jobs, its third straight month of gains after steep losses earlier this year. Employers are likely to add temporary workers before hiring permanent ones.