Nov. 6 (Bloomberg) -- The unemployment rate in the U.S. jumped to 10.2 percent in October, the highest level since 1983, casting a pall over the prospects for a sustained recovery and risking further erosion of President Barack Obama’s popularity.
Payrolls fell by 190,000 last month, more than forecast by economists, a Labor Department report showed today in Washington. The jobless rate rose from 9.8 percent in September. Factory payrolls dropped by the most in four months, and the average workweek held at a record low.
Treasury two-year notes rose on bets the Federal Reserve is more likely to maintain its pledge to keep interest rates near zero. The figures prompted Obama, who signed a bill today extending jobless benefits, to promise fresh measures to help put some of the 15.7 million unemployed Americans back to work.
“We will certainly have very bad payroll numbers in November and December,” said Harm Bandholz, an economist at UniCredit Global Research in New York, whose forecast for a 10.1 percent unemployment rate matched the highest among economists surveyed by Bloomberg. “We don’t foresee businesses going on a hiring spree anytime soon.”
Two-year note yields fell four basis points, or 0.03 percentage point, to 0.84 percent at 4:45 p.m. in New York. The yield touched 0.83 percent, the lowest since Oct. 2. The Standard & Poor’s 500 Stock Index closed up 0.3% to 1069.30 after falling as much as 0.7 percent.
Steeper Drop
Payrolls were forecast to drop 175,000 after an initially reported 263,000 decline for September, according to the median estimate of 84 economists surveyed by Bloomberg News. The jobless rate was projected to rise to 9.9 percent.
Obama signed into law a measure extending a tax credit of up to $8,000 for homebuyers and benefits for unemployed workers, and he promised to pursue further measures to create jobs.
“My economic team is looking at ideas such as additional investments in our aging roads and bridges, incentives to encourage families and business to make buildings more energy efficient,” additional tax cuts, and more steps to ease the flow of credit to small business and promote exports, he said today at the White House.
Jason McKinnon, 34, a San Francisco resident, is among those who could benefit from the measure Obama signed today to add up to 20 additional weeks of unemployment insurance.
Expired Benefits
McKinnon lost his $18-an-hour job in April as a video-game software analyst, and last month his benefits ran out. He said he has sent out hundreds of resumes to companies such as Facebook Inc. and Sony Corp., received about 50 responses and no offers. “I’m feeling like there’s less jobs out there and more qualified people,” he said in a telephone interview. Now he plans to take night classes at City College of San Francisco to improve his chances.
For congressional Democrats facing challengers in midterm elections next year, the continuing erosion in the job market puts them at political risk. Voters on Nov. 3 overwhelmingly cited unease with the economy and worries about jobs as they ousted the Democratic governor of New Jersey and installed a Republican governor in Virginia after eight years of Democratic rule there. Obama carried both states in 2008.
The entire House of Representatives, 34 senators and 37 governors are up for re-election in 2010.
Since Obama took office in January, the economy has lost 3.49 million jobs. The U.S. economy has lost 7.3 million jobs since the recession began in December 2007, when the unemployment rate stood at 4.9 percent.
The administration said last week that the $787 billion stimulus package plan signed into law in February was directly responsible for saving or creating about 640,000 jobs.
Under-Employment Record
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 -- reached a record 17.5 percent from 17 percent in September, today’s report showed.
“We’ve got lots of people just giving up and leaving the labor force,” said Julia Coronado, a former Fed economist who now works at BNP Paribas in New York. “Consumer incomes are under pressure, and that raises questions about the sustainability of the improvement we’ve seen in consumer spending.”
Some people are pulling up stakes and moving to where they think the job prospects may be brighter. Beth Rubin, 41, lost her position as a receptionist at the law firm Goldstein Bershad & Fried, PC in Southfield, Michigan, in October. The resident of Ferndale, a Detroit suburb, is now selling her furniture and moving to Georgia. “I’m looking to get a job in Georgia, and I don’t know about the job market there, but I can tell you Michigan is horrible,” Rubin said in a telephone interview.
Average Work Week
The average work week held at a record low of 33 hours in October, while average weekly earnings rose to $617.76 from $616.11 a month earlier. Workers’ average hourly earnings were 2.4 percent higher than October 2008, the smallest gain since 2004.
Some companies are cutting payrolls amid concern spending will cool as government-assistance programs wane. The New Brunswick, New Jersey-based Johnson & Johnson, the world’s largest health-products company, said Nov. 3 it will shrink its workforce by as much as 7,000 workers.
Factory payrolls dropped 61,000 after decreasing 45,000 in the prior month, today’s report showed. The median forecast by economists called for a drop of 42,000. The decline included a gain of 4,600 jobs in auto manufacturing and parts industries.
Auto Sales
Sales of cars and light trucks rebounded last month after plunging in the wake of the government’s so-called cash-for- clunkers incentive plan. Vehicles sold at a 10.5 million annual pace in October, up from a 9.2 million rate in September.
Inventories at U.S. wholesalers dropped in September for a 13th consecutive month, a separate report today from the Commerce Department showed, clearing the way for a pickup in orders as sales improve.
Today’s report contained some bright spots. Revisions added 91,000 to payroll figures previously reported for September and August, and the number of temporary workers rose by 34,000, the third consecutive gain.
Payrolls at temporary-help agencies often turn up before total employment because companies are not certain increases in demand will be sustainable enough to warrant the expense of taking on permanent staff.
‘Very Ugly’
“The rise in the unemployment rate is very ugly,” Ethan Harris, head of North America economic research at BofA Merrill Lynch Global Research, said in an interview with Bloomberg Television in New York.
The U.S. economy expanded last quarter for the first time in a year, growing at a 3.5 percent pace as government incentives spurred consumers to spend more on homes and automobiles.
Some companies are gaining confidence. Deere & Co., the world’s largest maker of agricultural equipment, said last week it’s recalling 452 workers, the majority of manufacturing employees dismissed earlier this year at a factory in Iowa.
Fed officials met in Washington this week and signaled that a return to economic growth alone won’t result in higher interest rates. Economist Joseph LaVorgna of Deutsche Bank Securities Inc. in New York said in a note to clients that the central bank “has never raised rates with unemployment rising.”
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