Unemployment rate to rise, could hit 10 percent

Slow recovery means unemployment rate to keep rising, possibly to 10 percent

The unemployment rate hasn't topped 10 percent since June 1983, but it could return to that painful level soon -- possibly as early as Friday, when the Labor Department issues its monthly jobs report.

Even as the economy shows signs of life, some employers are still cutting jobs, and many more are reluctant to hire after enduring the worst recession since the 1930s.

A return to 10 percent unemployment could pose political problems for President Barack Obama, who pushed through an ambitious $787 billion stimulus package in February intended to "save or create" 3.5 million jobs by the end of 2010. The administration said earlier this month about 1 million jobs have been saved so far.

But Republicans charge the stimulus has been an expensive failure as a net total of about 3 million jobs have been lost since its passage.

The Labor Department is scheduled to release unemployment figures for September on Friday. Wall Street economists expect the rate to rise slightly to 9.8 percent, from 9.7 percent in August. Employers are forecast to have cut 180,000 jobs, which would be the fewest since August 2008.

Obama said in a speech earlier this week that his efforts have "broken our economic freefall," though he acknowledged the labor market hasn't improved.

Also Friday, the Commerce Department is scheduled to release a report on August factory orders, which include both durable and non-durable goods. Economists surveyed by Thomson Reuters expect factory orders rose 0.7 percent following a 1.3 percent gain in July.

But the possibility of a surprise exists. Economists' forecasts for the August figure ranged from a decline of 1.5 percent to an increase of 2.1 percent, underscoring the uncertainty that exists as the economy attempts to rebound from the longest recession since the 1930s.

The reports will follow largely discouraging economic data Thursday.
First-time jobless claims rose more than expected last week to a seasonally adjusted 551,000, the Labor Department said. Economists viewed it as a sign that employers remain reluctant to hire.

And factories are struggling to mount a sustainable rebound. A gauge of manufacturing activity came in at 52.6 for September, the Institute for Supply Management said -- enough to signal growth for the second straight month but still down from August.

And even though consumer spending jumped by the most in nearly eight years in August, due partly to the government's Cash for Clunkers program, economists question whether the improvement can be sustained. They note that households face stagnant wages, tight credit conditions and other obstacles.

"The economy is not moving quickly from recession to expansion. It is moving in a very halting way," said Mark Zandi, chief economist at Moody's Economy.com. "Given the severity of the downturn, we are not going to come roaring back."

The news pummeled the stock market, which dropped sharply. The Dow Jones industrial average dropped 203 points.

Consumer spending rose a bigger-than-expected 1.3 percent in August, the Commerce Department reported Thursday. That's the best gain since October 2001, when the country was recovering from the Sept. 11 terrorist attacks.

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