The jump in US unemployment above 10 percent for the first time since 1983 will pressure President Barack Obama to find additional stimulus to keep a fragile economic recovery on track, analysts said.
The weaker-than-expected US Labor Department report on Friday showing an official jobless rate of 10.2 percent also suggests the Federal Reserve will maintain near-zero interest rates and other efforts to pump up credit to spark growth, economists said.
The Labor Department report, seen as one of the best indicators of economic momentum, showed job losses narrowed last month to 190,000. Revisions also showed fewer job losses in August and September.
The improvement was not enough, however, to prevent the jobless rate from surging to the first double-digit level for more than 26 years, from 9.8 percent in September.
Obama called the numbers “sobering” and said his administration was considering “further steps” to spark job growth.
“To that end, my economic team is looking at ideas such as additional investments in our aging roads and bridges, incentives to create jobs and steps to increase the flow of credit to small businesses,” he said.
Analysts said the rise above 10 percent represents a setback for the recovery and Obama’s efforts to lift the economy out of recession.
David Rosenberg, chief economist at Gluskin Sheff & Associates, said the economy remained in peril even after the impact of a US$787 billion stimulus enacted earlier this year.
“The return to job creation is as elusive as ever,” he said.
“It is hard to fathom that, according to the White House estimates earlier this year, the stimulus was supposed to help cap the unemployment rate at 8.5 percent. Here we are today with both an unemployment rate and a fiscal deficit-to-GDP ratio both north of 10 percent,” he said.
Cary Leahey, senior economist at Decision Economics, said the rise in joblessness posed new challenges for Obama.
“If you’re a politician in Washington of the Democratic variety, this is far worse than last month,” he said.
“This report is a soft start to the fourth quarter,” he said. “It is consistent with a double-dip [recession] or W-shaped recovery.”
Fred Dickson at DA Davidson & Co said the report “continues to point to an economy that is struggling, but the picture is not nearly as dire as seen at the beginning of the year.”
“Slowly, the trajectory is improving, but, given the huge number of unemployed and underemployed, our view of a very slow economic recovery in 2010 and 2011 remains very much in place,” he said. “This report will not do much to encourage the Fed to raise rates anytime soon.”
The number of unemployed persons increased to 15.7 million. Since the start of the recession in December 2007, the number of unemployed has risen by 8.2 million, the Labor Department said.
The US economy grew at a seasonally adjusted 3.5 percent annual rate in the July-September period. The increase was the first since the second quarter of last year.
RSS