April job loss at 539K - is the worst over?

Just look at it as the glass being half full. The U.S. economy lost 539,000 jobs in April, the U.S. Labor Department announced Friday, with the nation's unemployment rate rising to 8.9 percent, the highest rate since 1982. But the job loss total was considerably less than expected, suggesting layoffs may have peaked in the world's largest economy.

A Bloomberg News economists survey had forecast the economy to shed 630,000 jobs in April. The economy lost a revised 699,000 jobs in March.

But there is a half empty view, of course. Every major sector except health care and government experienced a loss of jobs. What's more, the nation's economy has now shed roughly 5.6 million jobs since the recession started in December 2007, and a staggering 4.2 million jobs in just the last seven months.

In April, manufacturing cut 149,000 jobs, construction 110,000, business services 269,000, retail 46,700 and hospitality 44,000; meanwhile, government added 72,000 jobs and education and health services 15,000.

Further, a separate unemployment gauge, which includes workers who can find only part-time work and discouraged workers, rose to a record 15.8 percent in April from 15.6 percent in March.

Are worst job losses over?

Stuart Hoffman, chief economist for PNC Financial Services in Pittsburgh, is in the camp that argues the worst may be over for the economy, job-loss-wise.

"Payrolls will keep declining in the next few months, but the huge job-slashing of the last five months may be finally coming to an end," Hoffman told Bloomberg News Friday. "We don't expect job growth until early next year. The economy is still falling, just not as rapidly as before."

That's why, while some economists express concern about the U.S. government's likely back-to-back $1 trillion budget deficits, the liberal think tank the Center on Budget and Policy Priorities feels strongly that the stimulus measures needed to get out of the current recession should continue to be the nation's focus.

"Congress must not undermine the effectiveness of stimulus spending that it included in the economic recovery act just as it is starting to take effect in the economy," the CBPP said. "The time for deficit reduction will come once a solid economic recovery is underway. Right now, however, the top priority is turning the economy around so that a recovery can start."

Conversely, The Heritage Foundation, a conservative think tank, disagreed, saying recession or not, Congress must weed out wasteful government programs, because needless spending frequently leads to higher taxes and diverts resources away from the more-efficient private sector.

"These discouraging [job loss] numbers underscore that Congress should not embark on an anti-growth taxing and spending frenzy. Unfortunately President Obama's budget currently before Congress would do just that, increasing spending by more than $1 trillion over the next decade," the Heritage Foundation said. "Government spending does little to help the economy because, in the budgeting process, political concerns trump economic merit."

In April, of the 13.7 million Americans listed as officially unemployed, a record 27.2 percent have been out of work longer than six months.

Also, total hours worked fell 0.6 percent in April and are down 6.6 percent in the past 12 months. Average hourly earnings rose 1 cent to $18.51 per hour -- the smallest increased for that metric in three years.

Economic Analysis: In addition to job losses, we are seeing other signs (initial jobless claims, rising consumer sentiment, bottoming home sales, rising manufacturing and service-sector indexes), that the recession is bottoming. That said, it will likely be several more months before job losses drop to low levels. Furthermore, low job losses do not constitute job gains -- or employment expansion-- hence policy makers need to keep that goal at the forefront. Commercial conditions have to get to where demand is requiring a net addition of workers, and the economy is a long way from that. Bottom line, there is still much work ahead, from a macro policy standpoint, but perhaps, based on April's lower job loss total, the economy is at least heading in the right direction.
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