American employers are laying off workers at a faster pace despite a few hopeful signs recently that the recession now the longest since World War II could be easing.
The Labor Department on Friday is slated to release a report expected to show that a net total of 654,000 jobs were lost last month. That’s more than the population of Baltimore.
If economists are right, it would mark a record four straight months that job losses topped 600,000.
“It’s going to be another month of gargantuan jobs losses,” predicted Stuart Hoffman, chief economist at PNC Financial Services Group. “Companies were slashing jobs and not filling vacant positions.”
With employers axing payrolls, the US unemployment rate is expected to jump to 8.5 per cent, from 8.1 per cent in February. If that happens, it would mark the highest jobless rate since late 1983, when the country was recovering from a severe recession that drove unemployment past 10 percent.
As the recession, which started in December 2007, eats into their sales and profits, companies are laying off workers and resorting to other cost-saving measures. Those include holding down hours, and freezing or cutting pay, to survive the storm.
Looking forward, economists expect monthly job losses continuing for most if not all of this year.
However, they are hoping that payroll reductions in the current quarter won’t be as deep as the roughly 650,000 average monthly job losses in the January-March period. In the best-case scenario, employment losses in the present quarter would be about half that pace, some economists said. That scenario partly assumes the economy won’t be shrinking nearly as much in the present quarter.
Federal Reserve Chairman Ben Bernanke said the recession could end later this year, setting the stage for a recovery next year, if the government is successful in bolstering the banking system. Banks have been clobbered by the worst housing, credit and financial crises to hit the country since the 1930s.
Even if the recession ends this year, the economy will remain frail, analysts said. Companies will have little appetite to ramp up hiring until they feel the economy is truly out of the woods and any recovery has staying power.
Given that, many economists predict the unemployment rate will hit 10 percent at the end of this year. The Fed says unemployment will remain elevated into 2011.
Economists say the job market may not get back to normal meaning a 5 per cent unemployment rate until 2013.
“There’s going to quite a long haul before you see the jobless rate head down,” said Bill Cheney, chief economist at John Hancock Financial Services.
To brace the economy, the Fed has slashed a key bank lending rate to an all-time low and has embarked on a series of radical programs to inject billions of dollars into the financial system.
And the Obama administration had launched a multi-pronged strategy to turn the economy around. Its $787 billion stimulus package includes money that will flow to states for public works projects, help them defray budget cuts, extend unemployment benefits and boost food stamp benefits.
The administration also is counting on programs to prop up financial companies and reduce home foreclosures to help turn the economy around.
On the economic front, some glimmers of hope have emerged recently.
Orders placed with U.S. factories actually rose in February, ending a six straight months of declines, the government reported Thursday. Earlier in the week, there was better-than-expected reports on construction spending and pending home sales. And last week a report showed that consumer spending an engine of the economy rose in February for the second month in a row after a half-year of declines.
Still, skittish employers announced more job layoffs this week.
3M Co., the maker of Scotch tape, Post-It Notes and other products, said it’s cutting another 1,200 jobs, or 1.5 per cent of its work force, because of the global economic slump. Fewer than half the jobs will be in the US, but include hundreds in its home state of Minnesota. The 1,200 figure includes cuts made earlier in the first quarter.
Elsewhere, healthcare products distributor Cardinal Health Inc. said it would eliminate 1,300 positions, or about 3 per cent of its work force, and semiconductor equipment maker KLA-Tencor Corp. said it will cut about 600 jobs, or 10 per cent of its employees.