WASHINGTON — The highest unemployment rate in more than two decades overshadowed small signs of improvement in the U.S. labor market in October and could impact holiday season hiring for retailers.

This story first appeared in the November 9, 2009 issue of WWD. Subscribe Today.

The unemployment rate moved above 10 percent in October for the first time since 1983, despite a continued slowdown in the rate of job losses. The economy shed 190,000 jobs in October, the lowest monthly loss this year. The unemployment rate rose to 10.2 percent from 9.8 percent in September, the Labor Department said Friday.

“Will the real unemployment report please stand up?” said John Lonski, chief economist for Moody’s Investor Services.

The conflicting trends in the unemployment number and the improving payroll figures are creating confusion, he said.

“The jump in the unemployment rate will grab the headlines and unfortunately will have the effect of further diminishing an already low level of consumer confidence, and moreover, that jump in the unemployment rate will adversely affect how businesses view the future and thus hiring activity probably will be less than otherwise,” Lonski said.

The rise in unemployment is also likely to make skittish retailers even more reluctant to hire because of the resulting drag on consumer spending, Lonski said.

Department stores cut 11,100 jobs from payrolls in October to employ 1.51 million. Specialty stores added 2,700 positions to employ 1.42 million.

Job losses in October were concentrated in retail, manufacturing, leisure-hospitality and construction, said Nigel Gault, chief U.S. economist at IHS Global Insight.

Despite continued weakness on the employment front — always a bad sign for consumer spending — investors pushed the S&P Retail Index up 1.7 percent, or 6.59 points, to 395.34 Friday, making for a 3.9 percent rise for the week. The Dow Jones Industrial Average increased 0.2 percent for the day and 3.2 percent for the week to close at 10,023.42.

Of the 171 stocks tracked by WWD, 39 rose last week, while four were flat and 128 declined.

In the manufacturing sector, textile mills, which produce apparel fabric, cut 1,300 jobs to employ 120,000. Textile product mills, which make industrial and home furnishing fabric, eliminated 1,300 positions to employ 124,700. Apparel factories cut 600 jobs to employ 163,700.

“Today’s employment report contained both signs of hope for recovery and painful evidence of continued labor market weakness,” said Christina Romer, chair of the President’s Council of Economic Advisers.

While the employment picture painted in October was worse than expected, there were some glimmers of hope in the report, economists said. Employers added 34,000 temporary jobs, considered a leading indicator.

Economists predict job declines will continue to ease heading into the end of 2009 and that employment could show signs of growth by spring.

“It is statistically impossible to have jobless claims decline and unemployment rise indefinitely,” Lonski said.

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