U.S. Jobless Rate Hits 8.9%, but Pace of Losses Eases

The New York Times

Published: May 8, 2009

By PETERS S. GOODMAN

The government monthly employment report shows that the American job market still remains dreadful and is worsening, however, in a slower pace, giving hopes that the recession may be relenting. The report shows that another 539,000 jobs disappeared in April and the unemployment rate increased to 8.9 percent. However, encouraging talk is slowly rising between people as deterioration was milder than expected.

Michael T. Darda, chief economist at the research and trading firm MKM Partners said, “less bad is always a prelude to good. It’s going to take some time for this economy to get back on its feet, but we might be closer to the recession ending.”

Supporting the Treasury’s claim that American banks are healthier than many analysts had anticipated, the jobs report presented made it clear that the nation is starting to drive out of the economic downturn. Panic that settled in people minds after the bankruptcy of the prominent investment bank Lehman Brothers has alleviated. Relief, rather than panic, is becoming more dominant motif of American commercial life. Ethan Harris, one of the chiefs of United States economic research at Barclays Capital, said, “It’s a confirmation that we’re in the early stages of a turn. We’re getting further and further removed from the confidence shock of last fall.”

However, others warned that we should not forget that the economy is still in recession, but a slower one. Many emphasized that although it is a positive sign, the economy is still not regaining its vigour. Dean Baker said, “this is really horrible in any normal context. This isn’t recovery. It’s a slowing recession. In any other time other than the recession we’re in, we’d be appalled by these numbers.” In fact, the numbers for April looked promising only compared to the numbers for recent months. And this was mostly because people become more inclined to seek jobs, rather than because businesses are inclined to hire workers.

President anticipated additional two million job losses before the economy begins recovering, “we’re still in the midst of recession that was years in the making and will be months or even years in the unmaking. We should expect further job losses in the months to come.”

The government will spending money to offer training programs for workers and to activate a stimulus plan. Labour Secretary Hilda said that her department will spend $750 million to retrain workers in faster-growing areas of the economy like health care, technology and renewable energy, rather than auto industry and other areas of manufacturing. Some economists insist the government-led initiative to stimulate the economy. A $787 billion spending and tax cut package will be installed to prevent any more job losses.

Now the question is whether new job losses will be overwhelming enough to disable the benefits of the stimulus spending. Lost wages combined with drops in real estate prices would prompt banks to tighten credit again, which would slow down recovery and worsen joblessness. The next few months will test the effectiveness of Obama administration’s stimulus plan.

Opinion: It is great to hear that the pace of the jobless rate eases although it is still worsening. As some economists believe or wish, I also wish the economy finally arrives at the relenting stage. However, we have to be aware of the fact that the jobless rate looks great only by comparsion with recent months. The numbers are still appalling compared to the times when economy was doing well. Also, the jobless rate has increased because more people seek jobs, not because businesses are inclined to hire workers. This means that businesses can still not afford to pay more workers. Therefore, I believe it is most important for the government to balance out direct and indirect plans. Direct plans will support people or businesses who are struck by the economic crisis and need help to go over it. The indirect plans will establish fundamental sectors of economy such as new energy, and transportation. In order to create more jobs, the government should invest in a growing industry such as renewable energy.