Surprising big jump in jobless rate to 10.2%

WASHINGTON -- The nation's unemployment rate last month leapt up to a higher-than-expected 10.2 percent, even as the pace of job losses slowed sharply, the government reported Friday.

Economists warned the worst is not over, predicting the rate could climb to more than 11 percent as employers produce more with fewer workers and shy away from hiring.

October's unemployment rate was the highest since April 1993 and was up four-tenths of a percentage point from September's 9.8 percent.

Employers shed 190,000 jobs in October, the slowest pace nearly since the devastating recession began in December 2007. The Bureau of Labor Statistics also revised its August and September unemployment numbers to reflect that 91,000 fewer jobs were lost over those two months than first reported.

That trend is positive. It shows that the torrid pace of job losses in the first half of the year has slowed dramatically. That supports a recent report that the U.S. economy grew at a 3.5 percent annual rate from July through September.

There are other positive signs. The professional and business services sector added 18,000 jobs in October. Temporary employment, which usually precedes a return to broader hiring, was up by almost 34,000 last month, the third straight month of gains.

Yet the surge in the unemployment rate overshadowed all else.

"History tells us that job growth always lags behind economic growth," President Barack Obama cautioned in a statement from the White House Rose Garden, shortly after he signed a new $24 billion economic stimulus bill into law.

The law provides 14 more weeks of unemployment benefits to all out-of-work people who have exhausted their benefits or will do so by the end of the year, estimated at nearly 2 million. Those in states where the jobless rate is 8.5 percent or above, including California, get an additional six weeks.

The measure also extends the popular $8,000 credit for first-time homebuyers that was to expire at the end of this month. It also creates a $6,500 credit for existing homeowners who buy a new place after living in their current residence for at least five years.

Obama called the October jobless report "a sobering number that underscores the economic challenges that lie ahead. . . . I won't let up until the Americans who want to find work can find work."

But critics, especially on the left, said Obama must move faster to create jobs.

"Every day, it becomes more urgent that the federal government step up to the plate with bold actions to boost job creation," said Richard Trumka, president of the AFL-CIO.

When discouraged workers and underemployed ones are factored in, a more broadly defined unemployment rate stands at 17.5 percent. About 35 percent of the jobless, about 5.6 million Americans, have been unable to find work for more than six months.

Many economists had expected unemployment to hit 10 percent this year, but few thought it would come as soon as October.

Mark Zandi, chief economist for Moody's Economy.com, predicted the jobless rate could hit 11 percent by mid-2010.

"Unemployment is rising while labor force is declining. Once labor force begins to rise, this will add to unemployment, as many coming back in will be unemployed," he said.

Still, some analysts found grounds for optimism.

"What people aren't talking about today and won't talk about for a couple of days is that if you take the peak of job losses and plot the trend, we still get to zero jobs lost sometime in the first quarter of 2010. That means we start adding jobs the next month after we hit zero," Fred Fraenkel, vice chairman of investment manager The Beacon Trust Co., said in a research note.

"Most people are talking about the U.S. starting to add jobs back in the second half of next year. It looks like that will start in the first half of the year, not the second half."

October was the 22nd consecutive month that employers shed jobs, the longest such streak since the Great Depression.