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Economy’s gains fail to lower jobless rate

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    Joshua Clark, age 11 months, whose father, Ken Clark, has been unemployed for about a year, sat in a stroller Wednesday during an event held by the Philadelphia Unemployment Project at the Arch Street Methodist Church in Philadelphia.
  • age 11 months

WASHINGTON » Economic reports suggest employers are laying off fewer workers, businesses are ordering more computers and appliances, and consumers are spending with more confidence. Combined, the data confirm the economy is improving, and further job gains are expected in 2011.

The economy’s outlook is brightening even though hiring has yet to strengthen enough to reduce an unemployment rate near 10 percent.

The number of people applying for unemployment benefits fell last week to a seasonally adjusted 420,000, the Labor Department said yesterday. That is the second-lowest level since July 2008.

Applications have fallen below 425,000 in four of the past five weeks—a significant improvement after hovering most of the year above 450,000.

But the unemployment rate rose in November to 9.8 percent. Employers added only 39,000 net new jobs.

The economy needs to generate more than 200,000 jobs a month consistently to make a dent in the unemployment rate. In addition, applications for unemployment benefits need to fall to 375,000 or below before job gains are likely to get to that level, economists say. Applications peaked during the recession at 651,000 in March 2009.

Even when claims do fall to those levels, the unemployment rate will likely remain high. With 15 million people out of work, it will take years to gain enough jobs to bring unemployment back to a more normal level of about 5.5 percent.

"Don’t forget how many people lost their jobs," said Tom Porcelli, an economist at RBC Capital Markets, in reference to the more than 7.3 million laid off during the worst recession since the Great Depression. "The unemployment rate is still going to remain high because of all the people out of work."

As of last month, more than 6.3 million people have been out of work for six months or more, making up nearly 42 percent of the unemployed. That is near a record high of 6.76 million set in May.

And those out of work for long periods will find it particularly hard to get back to work, Porcelli said.

Employers are less likely to hire the long-term unemployed, in part because many workers’ skills deteriorate the longer they are out of work.


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