WASHINGTON -- The weak job market is expected to get worse, but it's unclear how deep and how long the decline will be, given the extremely uncertain financial and economic climate.
The government is expected to report Friday that employers cut jobs in September for the ninth straight month. Last month, the unemployment rate jumped from 5.7% to 6.1%, highest in nearly five years. A number of economists, such as those from Mission Residential, Moody's Economy.com and Global Insight, predict it will top 7% sometime next year.
Consumers were pessimistic about the job outlook even before the financial package was voted down in the House on Monday. Nearly one-third of Americans said jobs were "hard to get" last month, the Conference Board said Tuesday. That was the biggest percentage since October 2003, when the economy was in the middle of the so-called jobless recovery following the 2001 recession. The poll was taken Sept. 1-23.
Stephen Grubba, owner of Superior Staffing Solutions, a job placement firm in Greer, S.C., says workers are clearly nervous. Grubba has openings to fill, but prospective employees don't want to leave the safety of their current jobs. "They are not going to go unless the company where they are at is having some sort of layoffs," he says.
Paul Villella, CEO of Reston, Va.-based HireStrategy, which does temporary and permanent job placements, says while business has been good but not "great," there is a lot of uncertainty.
"There's a lot of concern and in some regards, fear, but nobody has quite been able to articulate what (the financial turmoil) means for their business, including me," he says.
Job market hard to predict
Some economists, such as those from Mesirow Financial, John Hancock Financial and Action Economics, predict that the unemployment rate, although headed higher, won't hit 7%. But they note it's a tough time to be making forecasts.
"How do you forecast unemployment in the middle of a tornado?" asks Richard Yamarone, director of research at Argus Research, noting that he rapidly is becoming more pessimistic given inaction in Congress and the worsening credit crunch.
Some economists say that without quick legislation to aid financial institutions, the credit market will tighten further and that will reverberate throughout the economy and lead to a loss of jobs.
If credit is harder to obtain or costs more, "There is less demand. With less demand, then businesses start to lay people off," says Joel Naroff of consulting firm Naroff Economic Advisors.
Even with a bailout, he says, the jobless rate will rise to 7%, because it will take time for credit markets to ease, and in that time conditions will deteriorate. Without a bailout, unemployment will likely top 8.5%, Naroff says.
Economist Mark Zandi from Moody's Economy.com says that without a rescue bill, the jobless rate could hit double digits.
Unemployment peaked at 6.3% after the 2001 recession. During the 1981-82 downturn, one of the longest since World War II, it hit 10.8%.
Unemployment rates were higher in August than a year earlier in 354 of the 369 metropolitan areas, the Labor Department said Tuesday. Jobless rates were lower in 13 areas and unchanged in two areas.
The job market in Texas remains strong, particularly in the energy sector, says Sue Burnett, president of Burnett Staffing Specialists, which does business across the state. But she said she doesn't expect that to last.
"Small- and medium-sized companies will start having problems if they have been borrowing money. I fully expect a slowdown."
Despite Americans' concern about jobs, consumer confidence rose in September as they became less negative about the future, despite a deteriorating view of the current economy. The Conference Board's Consumer Confidence Index was 59.8 in September, up from 58.5 in August and the highest since April.
While consumer confidence is closely watched by economists, it often does not track well with spending patterns. The job market is considered the biggest link to consumer spending, which accounts for over two-thirds of U.S. economic activity.
Tuesday, the International Council of Shopping Centers and Goldman Sachs said retail sales fell 0.2% last week. The ICSC said it now thinks retail sales were flat to up 1% in September from a year earlier.
"There's just a new level of uncertainty," says ICSC chief economist Michael Niemira. "Until we get certainty on the financial side, it's a lock-down mode," he says. "The whole character of spending has changed. It's all about essentials, it's all about basic purchases."