Unemployment still prevails

Eighteen months into the recession, U.S. workers are still rapidly losing jobs. And they may have to wait years before seeing a full recovery in the labor market.

The government on Friday said the economy lost 345,000 jobs in May, fewer than the number shed in April. The unemployment rate hit 9.4%, the highest since the early 1980s, and is expected to shoot even higher in the coming months.

Tim Foley


The latest employment decline came alongside hope in recent weeks that the economy is ending its free fall. Housing activity is stabilizing, and consumer confidence is turning up.

But a turnaround in the overall economy won't translate into a full turnaround for workers. Most forecasters expect employers to slash more jobs than they're adding at least through the end of the year. The huge job losses may end, but they won't turn into meaningful job gains until sometime in 2010.

What happens to the labor market once the economy is growing again? Some past recessions, especially those with the largest employment declines, saw the job market rebound strongly once the overall economy picked up. But that's not a sure thing. The aftermath of the 2001 recession was dubbed a "jobless recovery" because employers continued shedding workers even as the economy showed robust growth.

Despite indications that the worst monthly job declines are over, the road to recovery will be bumpy for the next year. Employers remain unsettled from a turbulent financial crisis. So many millions of people are out of work that absorbing them back into new jobs will take time. For the summer and fall, an improvement in the economy may not even be evident to most people out searching for jobs. After that, it'll be a long road back to the days of a tight labor market.

Some of the major employment concerns now:

Has the job market been this bad before?

Only a handful of times since the Great Depression. The economy has shed six million jobs since the start of 2008. That's almost one out of every 20 jobs, making the current decline the worst drop in a half century. Unemployment has doubled since the start of the downturn, with 14.5 million people looking for jobs in May. The jobless rate is likely to approach, and maybe even surpass, 10% by year end.

How long will unemployment remain high?

Forecasters expect unemployment to remain elevated at least into 2012. The overall economy is expected to start recovering late this year and into 2010. But employers may be slow to hire workers until they're sure demand for their products and services has rebounded.

What will that mean for paychecks?

Don't expect too many raises. When the economy is weak, employers can keep wages contained because workers find it much harder to secure jobs elsewhere. Companies also see productivity increase as they get more output out of fewer workers. That helps companies restore their profitability.

Many employers have already cut salaries and benefits in addition to jobs. Companies also are cutting workers' hours, instituting furloughs and forced vacations and cutting benefits such as tuition reimbursement.