Wednesday, November 26, 2008

More part-time work is bad sign for U.S.

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By Lucia Mutikani

Seven months after losing a job in construction, Lorenzo Henderson found work earlier this month packing shelves at a supermarket three days a week, joining a trend toward part-time work that is worrying economists.

The 24-year-old father of two from Washington said he had to settle for part-time work after becoming increasingly disillusioned about getting a full-time job anytime soon.

"To be honest, I am not sure my situation will change. If that was the case I would have had a job a long time ago," Henderson told Reuters. "When I got laid off I thought I would get something quickly, but seven months later I am still waiting for a job."

On November 7, the government said the U.S. unemployment rate rose to 6.5 percent in October, the highest rate since March 1994.

But, more worrying for economists, the number of people working part-time for economic reasons jumped 645,000 in October to 6.7 million. That has convinced some economists that the United States is staring at a recession at least as deep as the 1980s contraction.

"No higher figure has been seen since the 1982 recession, when a record 6.86 million people were working part-time for economic reasons," said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co in New York.

"The surge is of course a sign of the times: people are working part-time to make ends meet."

Depending on the number of hours he works, Henderson can take home up to $180 a week for his three days at The Giant Supermarket in Washington's Brentwood neighborhood, compared with $475 a week when he was working at the Washington Nationals baseball stadium.

"I am stressed out about how to pay the bills. I have to worry about food, clothing and shelter. Christmas is coming, the money I am getting from the part-time job is tight," he said.


U.S. employers slashed 240,000 jobs in October after eliminating 284,000 positions in September. Some 1.2 million Americans have lost their jobs since the start of the year.

Among those who lost their job in October is 51-year-old Brad Hall, who used to earn about $1,080 a week laying underground pipes at construction sites in Wilmington, Illinois.

He and his wife now depend on a weekly $300 unemployment check, insufficient for day-to-day needs given the high cost of food, he says.

Analysts reckon the situation will deteriorate further in the months ahead and expect the jobless rate to peak at anywhere between 8 percent and 10 percent.

"We are going to continue to get jobs reports like this for some months because the economy is starting to cycle down," said Peter Morici, a business professor at the University of Maryland.

"We had a collapse in housing construction, now non-residential construction is collapsing, retail sales are declining. We are expecting to lose more jobs in manufacturing and construction. The problem is the banks are not lending money."

A U.S. housing market recession has left banks worldwide with nonperforming assets on their balance sheets, causing the collapse of some financial institutions and leading to a global credit crunch.

The crisis has forced governments to take stakes in some big banks to infuse capital into the financial system and has led central banks to cut interest rates.

But those actions have come too late to avert a global recession, analysts say, and the downturn in the United States is expected to be deep and long.

"Job losses are now piling up. In the first eight months, when the recession was in low gear, average monthly payroll jobs were cut by 108,000," said Brian Fabbri, managing director of economic research at BNP Paribas in New York.

"In the past two months the monthly average payroll job loss has speeded up to 262,000. In comparison, this cycle is beginning to produce more job losses than the last three recessions," he said, referring to downturns in 2001, 1990-1991 and 1981-1982.

LIKE 1982

The U.S. manufacturing sector has been the hardest hit, shedding 90,000 jobs in October.

It was closely followed by the construction sector, where employment fell by 49,000. Construction employment has fallen by 663,000 since peaking in September 2006.

Steep job losses have also been recorded in the retail, financial and service sectors. The only bright spots in October were the health care and mining sectors, which added 26,000 and 7,000 positions, respectively.

"Unfortunately, the current scenario is probably more like 1980-1982, as job losses have likely only begun to occur from recent events," said Miller Tabak's Crescenzi, referring to the seizing up of credit markets in October.

"More is on the way. The last time that there were three months of large declines was in the 1980-1981 and 1981-1982 recessions. Back then, the unemployment rate peaked at 10.8 percent," he said.

History is not on the side of job seekers like Hall and Henderson. An analysis of the U.S. employment cycles since 1948 suggests the length of time the unemployed spend between jobs has grown longer.

While jobs are still available, the bulk tend to be part-time and are poorly paying. For those who can find full-time positions, employers are likely to offer less-attractive packages.

A survey by the Society for Human Resource Management released on November 7 found that the majority of companies in the manufacturing and services sectors were keeping wage and benefits packages flat for new hires.

Henderson, the former construction worker in Washington, has this advice: "If you have the blessing to receive a job right now, the best thing you can do is keep it as long as possible."

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