Saturday, October 3, 2009

Unemployment Up To 9.8%; Bankruptcies Up Too

The question is not whether more bankruptcy cases will be filed. Rather, the question is how many more bankruptcy cases will be filed. Some experts are anticipating a huge increase in filings. This year is a bumper year for bankruptcies already. The bad jobs report will only add more fuel to the fire.

The New York Times has reported that after several months in which the American economy flashed tentative signs of improvement, a sobering report on the national job market released on Friday amplified worries that a lengthy period of lean times lay ahead.

263,000 jobs in September, and the unemployment rate edged up to 9.8 percent from 9.7 percent in August, according to the Labor Department’s monthly snapshot of the employment picture.

Though the job market worsened, the pace of deterioration remained markedly slower than during the early months of the year, when roughly 700,000 jobs a month were disappearing. That improvement seems consistent with the widespread belief that the recession has given way to economic growth. Yet the report also buttressed fears that economic expansion would be weak and hesitant, with scarce paychecks and economic anxiety remaining prominent features of American life well into next year.

“This is a weak report,” said Stuart G. Hoffman, chief economist at the PNC Financial Services Group in Pittsburgh. “The rate of job loss has tapered off, but we still haven’t reached the point where businesses are willing to hire.”

The Labor Department also made a preliminary revision in its survey of private employers that indicated the job market shrank even more during the recession. The department disclosed that in March this year the economy held 824,000 fewer jobs than previously reported, making an already bleak picture worse.

The endurance of hard times seems likely to increase pressure on the Obama administration and Congress to consider another dose of spending aimed at stimulating the economy, even as the government grapples with deficits projected by some economists to exceed $10 trillion over the next decade.

Despite a $787 billion stimulus package adopted early this year and aimed in part at shoring up state and local coffers, government jobs slipped by 53,000 in September.

“That’s the budget crunch hitting,” said Dean Baker, co-director of the Center for Economic and Policy Research in Washington. “We’re still losing jobs at a very rapid pace. We’re still looking at an economy with a lot of weakness.”

For millions of unemployed people, the latest data merely confirms something they have come to understand intimately, through the discouraging process of seeking work.

“There’s nothing out there,” said Jerry Lamirande, a technology systems engineer in Amarillo, Tex., who has been without a job since April 2008.

During the technology boom of the late 1990s, Mr. Lamirande, 62, worked for IBM, where he drew a salary of about $130,000. After a layoff seven years ago, he has earned about $70,000 a year as a technology consultant working on contract.

Since the spring, he and his wife have lived on her modest salary as a public school teacher and on hardship withdrawals from his retirement account. He has searched nationwide for his next contract, willing to relocate.

“I’ve got to go where the opportunities are,” he said. “The problem is, there aren’t many opportunities.”

The latest jobs report lent credence to that contention. The unemployment rate continued to inch toward double digits, a level last seen in June 1983. The so-called underemployment rate (which includes people whose hours have been cut, and those working part-time for lack of full-time positions, along with the jobless) reached 17 percent, the highest level since the government began tracking it in 1994.

More jobs were lost last month, at 263,000, than were lost in August, as the Labor Department revised the August decline to 201,000 jobs from the 216,000 it initially reported.

Health care remained a rare bright spot, adding 19,000 jobs in September, but construction jobs slipped by 64,000, manufacturing declined by 51,000 and retail lost 39,000 jobs.

Most economists assume the economy expanded at an annual pace of about three percent from July through September. But debate focuses on the vigor and staying power of the recovery.

Optimists anticipate a robust bounce-back from what now stands as the longest recession since the Great Depression. But most economists expect a sustained slog through high rates of joblessness.

The economic improvement in recent months largely stems from businesses cutting inventories at a slower pace. As some companies begin to rebuild stocks, the impact could wash through the economy for a few more months, adding jobs and moderating the overall decline.

Then the underlying weakness of the economy will probably reassert itself, say experts. After years of borrowing against homes and cashing in stock to spend in excess of their incomes, many Americans are tapped out. Austerity and saving have replaced spending and investment in many households, constraining the economy.

As many Americans transition from living on home equity loans to sustaining themselves on paychecks, weekly pay continues to effectively shrink: Over the last year, average hourly earnings for rank-and-file workers — some 80 percent of the labor force — have increased by 2.5 percent. But average weekly earnings have expanded by only 0.7 percent, less than the increase in the cost of living, because employers have slashed working hours.

In September, the average workweek edged down by one-tenth of an hour, to 33 hours.

For those out of work, the job market looks harsher now than at any point in the recession. The number of people who have been jobless for more than six months increased in September by 450,000, reaching 5.4 million.

“We have a truly massive crisis of long-term unemployment,” said Christine L. Owens, executive director of the National Employment Law Project in a statement, adding that nearly 400,000 jobless people had exhausted their unemployment benefits by the end of September. “Today’s employment report is a marching order for Congress to pass unemployment benefit extensions to all states, quickly.”

The first signs of improvement are likely to be seen among temporary workers, say experts, as companies now hunkering down in the face of uncertain prospects take tentative steps to expand.

But temporary help services lost 1,700 jobs in September.

“Companies are extremely cautious,” said Roy G. Krause, chief executive of Spherion, a recruiting and staffing company based in Fort Lauderdale, Fla.

All of which translates into continued apprehension in many households.

“It’s terrifying,” said Stephanie Wheeler, 56, of Elizabeth, N.J., who has drained her savings to $800 in the year since she lost her job at a data-processing company, rendering her ability to pay the rent on her apartment uncertain.

“I’ve been here for eight years,” she said. “I don’t know what’s going to happen. I’m petrified of being set out on the street.” Source: as reported by the The New York Times.

Warmest Regards,

Bob Schaller

Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm

Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.

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