The jobless rate in the U.S. is likely to approach 10 percent in coming months as the economy fails to grow enough to employ people rejoining the labor force, economists said.
Private payrolls climbed 67,000 in August, after a gain of 107,000 the previous month, and the unemployment rate rose to 9.6 percent, the Labor Department reported Sept. 3. The median forecast in a Bloomberg News survey of economists called for an increase of 40,000. The economy expanded at a 1.6 percent annual rate in the second quarter, down from 3.7 percent in January through March.
Only 723,000 people were added to company and government payrolls so far in 2010, or 8.6 percent of the 8.4 million jobs lost during the recession, which began in 2007 and is the biggest employment slump in the post-World War II era. Still, the August job figures eased concerns the economy will falter because businesses are adding to their workforce and reduced the odds the Federal Reserve will ease policy at its Sept. 21 meeting.
“Growth is too sluggish to successfully bring down the unemployment rate,” said Michelle Meyer, a senior economist at BofA Merrill Lynch Global Research in New York. “At this stage, about one year into the recovery, this was still quite feeble job growth.”
BofA Merrill Lynch on Sept. 1 said the jobless rate will peak at 10.1 percent next year, up from a previous projection of 9.5 percent, with growth slowing to 1.8 percent for all of 2011, down from an earlier estimate of 2.3 percent.
The employment report, together with figures last week showing manufacturing expanded faster than forecast in August, also bolstered Fed Chairman Ben S. Bernanke’s view that the conditions are in place for a pickup in growth in 2011.
Neal Soss, chief economist at Credit Suisse in New York, said in a Sept. 3 note to clients that the economy will expand at a 2 percent rate this quarter, compared with a previous projection of 2.5 percent. He also revised his forecast for the unemployment rate, saying it will end the year at 9.6 percent instead of 9.2 percent.
Unemployment, which reached a 26-year high of 10.1 percent in October, will average more than 9 percent through 2011, according to a Bloomberg News survey last month.
President Barack Obama yesterday proposed spending at least $50 billion to rehabilitate the nation’s transportation infrastructure to help spur the economy.
At a Labor Day rally in Milwaukee two months before midterm congressional elections, Obama called for a six-year program to fix roads, railways and runways, and to modernize the air-traffic control system.
“All of this will not only create jobs now, but will make our economy run better over the long haul,” Obama said.
The president will also urge Congress to permanently extend and expand a research-and-development tax credit for businesses, according to two administration officials. The plan, which he’ll announce in Cleveland tomorrow, would cost about $100 billion over a decade.
Obama’s approval ratings have slipped and support for the Republican Party has grown during the summer months amid signs the economy was cooling. A USA Today/Gallup Poll completed Aug. 30 found Americans believe Republicans in Congress would do a better job on the economy than Democrats, by 49 percent versus 38 percent plurality.
Overall employment, including government agencies, fell 54,000 for a second month, the Labor Department report showed. The decrease reflected a 114,000 drop in temporary workers hired by the government to conduct the 2010 census.
The unwinding of census employment distorts the payroll figures for months as the government dismisses workers as the count winds down. For that reason, economists say private payrolls, which exclude government jobs, are a better gauge of the state of the labor market.
U.S. stocks rose and Treasuries fell following the Sept. 3 employment report. The Standard & Poor’s 500 Stock Index rose 1.3 percent to close at 1,104.51 in New York. Ten-year Treasury yields climbed to 2.71 percent from 2.63 percent the day before.
Economists at Morgan Stanley in New York, led by Richard Berner and David Greenlaw, are forecasting growth at a 2 percent pace for the last three quarters of 2010. Berner and Greenlaw were the most accurate forecasters of unemployment last year, according to data compiled by Bloomberg. The ranking of 65 forecasters covered the four quarters through June 2009.
“Such tepid growth implies a higher unemployment rate at year-end, perhaps 9.7 percent rather than the 9.4 percent we had assumed,” the economists said in an Aug. 27 research note.
The job market is rebounding faster than it did after the previous recession. Then, company payrolls didn’t start to grow consistently until 21 months after the slump ended in November 2001.
Although the committee of the National Bureau of Economic Research that dates business cycles hasn’t declared an end to the recession that started in December 2007, the economy stopped shrinking in the second quarter of 2009. Private payrolls have expanded every month since January 2010.
Company payroll gains averaged 122,750 during the first eight months of unbroken job growth in the wake of the 2001 recession, compared with a monthly average of 95,375 this year.
The so-called underemployment rate -- which includes part-time workers who’d prefer a full-time position and people who want work but have given up looking -- increased to 16.7 percent in August from 16.5 percent, last week’s Labor Department report showed.
The number of people unemployed for 27 weeks or more fell as a percentage of all jobless to 42 percent from 44.9 percent.
Some export-oriented companies are boosting staff as the global economy shows stronger signs of growth than the U.S. Peoria, Illinois-based Caterpillar Inc., the world’s largest maker of construction equipment, said last month it may add as many as 9,000 workers worldwide this year as sales climb in developing markets.