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Article published November 07, 2009
Jobless rate soars to highest since 1983
10.2% figure may go higher, experts say

WASHINGTON - The nation's unemployment rate jumped to an unexpected 10.2 percent in October, throwing 190,000 more Americans out of work, raising questions about whether the budding economic recovery will endure, and confronting President Obama with a politically explosive new challenge.

Not since 1983, after a double-dip downturn had sent the auto, steel, and housing industries plunging, has the jobless rate gone so high. And many economists predicted it would go higher still.

About 15.7 million workers now have no jobs, the government said in its monthly unemployment report, and an estimated 5 million more are working fewer hours and drawing smaller paychecks than they were before the worst recession in a generation hit.

Trying to soften the dismal news, President Obama signed legislation yesterday that gives added aid for the jobless and expands and extends homebuyer tax credits.

But few economists thought either measure would have a substantial impact on the worsening employment picture, or solve the President's increasingly urgent political problem: how to spur hir-ing quickly and do it soon.

While most analysts had expected the unemployment rate to inch up from September's 9.8 percent, the October spike was larger than expected.

And it was particularly disturbing because it was not pushed up by new workers coming into the labor market, as often happens when the economy begins to climb out of a recession. Rather, the latest downturn resulted from continuing cutbacks among those with jobs.

The last time the national jobless rate was higher was in March, 1983, when it was 10.3 percent, according to the Bureau of Labor Statistics. It had been as high as 10.8 percent in both November and December of 1982.

The last time the rate was in double digits was in June, 1983, when it was 10.1 percent.

"I'm more nervous about the staying power of the recovery after today's numbers," said Mark Zandi, chief economist at Moody's Economy.com. He said he expects joblessness to stay in double digits throughout next year, climbing to as high as 11 percent.

That level of unemployment, stretching as it does over most of the country instead of being confined to one hard-hit region like the "Rust Belt" of the 1980s, presents Mr. Obama and his Democratic colleagues in Congress with economic and political challenges.

On the political front, a bad economy threatens the Democrats' control of Congress as the 2010 off-year elections approach. Even if economic recovery continues, job gains are likely to occur slowly and unemployment is expected to remain high for most - if not all - of next year.

Hitting double digits will have an immediate psychological effect nationwide, said economist and former Clinton administration Labor Secretary Robert Reich, who teaches at the University of California, Berkeley. It's "an important political threshold" and probably will force the administration's hand on added steps to stimulate jobs, Mr. Reich said.

The Democrats' political vulnerability was clear in the reaction of congressional Republicans.

"The President himself has said that job creation is the ultimate measure of economic performance," said House minority leader John Boehner (R., Ohio). "Today's report is just another reminder that American families and small businesses are still struggling as the White House response continues to fall short."

For his part, Mr. Obama spotlighted congressional action to extend jobless benefits for 14 weeks in all states and 20 weeks in hard-hit states, such as California. The legislation also extends until April 30 the popular tax credit of up to $8,000 for first-time home buyers and creates a credit of up to $6,500 for homeowners who want a new house. The income requirements for the credit also were expanded.

Speaking in the Rose Garden, Mr. Obama said his administration had stopped "the free fall of the economy" and his team was considering ideas.

At least two bright spots were in the October report. While large, the number of jobs lost declined - as it has for several months - and the number of temp jobs, which are considered a bellwether, increased.

Absent government action, however, those developments and other factors point toward a long, slow recovery in jobs.

Already, consumer confidence for October came in well below what analysts were expecting.

Shoppers' sentiments about the state of the economy are the gloomiest in nearly three decades. Stores, always with an eye on holiday sales, are especially worried this year.

"This is a situation where the recovery balloon is getting off the ground but might not have enough power to keep rising," Brian Bethune, an economist at IHS Global Insight, said.


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