Unemployment on the Rise in the US

A Reuters report of a survey on July 2 has suggested that the US economy will likely shed a further 355,000 jobs in June as the unemployment rate hit a 26-year high. For for a nation mired in its deepest recession since at least World War Two, that may be good news.

The US Labour Department’s report due today is expected to depict an economy still wallowing in recession but confirming that the pace of job loss has slowed. This is positive news to indicate the 18-month-old recession is easing its grip.

The report is expected to show that the unemployment rate rose to 9.6 per cent — its highest since June 1983 — from 9.4 per cent in May.

It is also expected to show employers has cut apparently 355,000 non-farm jobs.

While still severe, that would be in line with the 345,000 positions already eliminated in May. This indicate a sharp slowing in job losses for an economy that shed an average of 691,000 jobs a month in the first quarter.

Although employers will have shed workers for 18 straight months, the trend has been moderating since job losses totalled 741,000 in January.

IHS Global Insight is of the view that the improvement should all come in the private sector. Meanwhile, they expect to see government jobs declining, as temporary jobs related to the preparations for the 2010 Census begin to disappear.

The pace of job cuts in the hard-hit manufacturing sector likely slowed to 148,000 in June from a 156,000 loss the previous month, the Reuters poll found.

“Auto layoffs should slow from May, which was exaggerated by Chrysler shutting down production, while job losses elsewhere should resume a trend for improvement,” 4CAST wrote in its preview of the data.

If it comes in close to the median forecast, or if job losses are even smaller, the report will likely be viewed as the latest sign the recession, the longest since the Great Depression, was winding down.

Heartened by a spate of relatively upbeat reports, economists have become increasingly convinced the recession will lift in the second half of the year.

Last week, reports covering the month of May showed a stronger-than-expected rise in orders for US-made durable goods, an increase in consumer spending and the second straight monthly rise in existing home sales.

However, individual job-loss forecasts among the economists surveyed varied widely. Some expected as many as 500,000 jobs were cut in June, while others thought as few as 200,000 positions would be lost.

Even if the economy is close to a turn, the unemployment rate is expected to continue to march higher, with many economists expecting it to peak around 10 per cent.

“I think it’s pretty clear now that unemployment will end up going over 10 per cent,” President Barack Obama told reporters last week.

Since the start of the recession in December 2007, the economy had lost 6 million jobs through May and the jobless rate had increased by 4.5 percentage points.