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Unemployment rate dips as many discouraged workers give up looking

WASHINGTON — The unemployment rate fell in September in most U.S. metro areas, although that's largely because more people gave up on job searches than found new work.

"The job market is not recovering at all yet," said Jim Diffley, regional economist for IHS Global Insight. "We're looking at another jobless recovery."

The September unemployment rate fell in 223 of 380 metro areas, or about 59 percent. The jobless rate rose in 123 metro areas, and was unchanged in 34.

Thirteen metro areas reported unemployment above 15 percent, down from 16 areas in August.

But in many cases, the drops resulted from discouraged workers leaving the labor force, perhaps to return to school. Once jobless workers stop looking for work, they are no longer counted in the unemployment rate.

The trend likely will continue for several months, and then reverse as the economy slowly improves, Diffley said. A growing economy, as evidenced by Thursday's report that the gross domestic product rose 3.5 percent in the third quarter, will cause many people to resume job searches, increasing the size of the labor force, Diffley said. But hiring should remain weak and won't keep up with the influx of job seekers, which will cause the unemployment rate to rise, he said.

A third of metro areas will have jobless rates above 10 percent in the fourth quarter of 2010, according to a forecast by IHS Global Insight.

Most will continue to be concentrated in states hit hard by the housing and manufacturing slumps, such as Florida, the forecasting firm said.

The unemployment rate won't fall below 8 percent in more than half of metro areas until the end of 2012, IHS Global Insight predicts.

Nationwide in September, 600,000 people looking for work threw in the towel, the Labor Department said this month.

Several metro areas in Wisconsin illustrate the trend: The state's unemployment rate dropped to 7.7 percent from 8.4 percent in August. Three of its cities saw significant improvement in their unemployment rates: Wausau, Eau Claire and Fond du Lac.

But the work force shrunk in all three cities, while the state lost about 21,000 jobs.

"Conditions have not improved as much as the unemployment rate has," said Morgan McGowan, an associate economist at Moody's who analyzes Wisconsin.

The state has suffered from widespread job losses in manufacturing, McGowan said, including more than 1,000 layoffs this year by Milwaukee-based Harley-Davidson Inc. and the closing of a Briggs & Stratton Corp. engine factory.

A drop in its work force of 14,600 people, or about 1 percent, reduced the unemployment rate. That's higher than the nationwide decline of 0.4 percent.

First-time claims dip

The Labor Department said Thursday its tally of newly laid-off U.S. workers seeking unemployment insurance fell by 1,000 to a seasonally adjusted 530,000 last week. Analysts expected a steeper drop to 521,000, according to a survey by Thomson Reuters. The number of people continuing to claim benefits, meanwhile, dropped sharply by 148,000 to 5.8 million, a steeper drop than analysts expected.

Unemployment rate dips as many discouraged workers give up looking 10/29/09 [Last modified: Thursday, October 29, 2009 10:23pm]
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