Hospital workers and teachers should be OK, but housing, auto layoffs expected to be high

Tuesday, April 8, 2008

WASHINGTON -- Hospitals, schools and the assembly line at an airplane factory look like pretty good places to be with a recession looming and unemployment rising. Construction workers, real estate agents and auto workers aren't expected to fare as well.

The startling news that the economy lost 80,000 jobs last month and nearly a quarter-million over the last three months is the starkest signal yet that the country has probably fallen into a recession, with things on the job front expected to get worse.

"All the indicators suggest that we will see even larger job declines in coming months. Businesses are getting nervous and pulling back," said Mark Zandi, chief economist at Moody's

While the downturn is expected to be short and mild, economists are still forecasting the unemployment rate, which jumped to 5.1 percent in March, will climb much higher before the nation's job engine sputters back to life.

Economists are forecasting a jobless rate that will peak around 6 percent, but probably not until early next year, several months after the recession is expected to end. Analysts said as many as 2 million people could lose their jobs in the current downturn.

In an environment of a sluggish economy and rising unemployment, analysts said there will be some safe harbors where job demand will keep growing. First and foremost in this group will be health care, where the demographics of an aging population mean the demands for medical care will keep rising.

Also a bright spot in a generally bleak jobs picture will be education, again driven by the demographics of a rising population of school-age children and students attending colleges, community colleges and trade schools.

Outside of those areas, the falling value of the dollar against many foreign currencies is helping to power an export boom, which is benefiting farmers and some segments of manufacturing, particularly airplane makers and factories producing various types of heavy machinery where the United States enjoys a competitive edge.

But other segments of manufacturing are not faring nearly as well. Domestic automakers have been laying off workers in the face of slumping sales as the weak economy and soaring gasoline prices cut into demand. General Motors and Chrysler reported U.S. sales were down 19 percent in March compared with a year ago, while sales at Ford fell by 14 percent.

Other manufacturers, such as appliance and furniture makers, have been hurt by the deep downturn in housing. In all, manufacturing lost 48,000 jobs in March, with half of those cuts coming in autos and auto parts.

Construction, decimated by the housing slump, shed 51,000 jobs, the ninth straight month that construction jobs have declined. Hiring has also fallen in related industries such as real estate agents and mortgage brokers, as well as at the Wall Street firms that have declared billions of dollars in losses from bad investments on securities backed by subprime mortgages.

In general, hiring is expected to hold up in areas where consumers will keep spending money regardless of the health of the economy, such as at grocery stores, gasoline stations and repair shops. But companies selling discretionary services -- such as various segments of the tourism industry, from airline travel to hotels to restaurants -- are likely to experience more layoffs.

"Anything that people can defer, like a vacation or buying a new car, tends to suffer," said David Wyss, chief economist at Standard & Poor's in New York. "The basics like food and medicine tend to do pretty well."

Small businesses, which generate the bulk of the country's new jobs, are decidedly more pessimistic. William Dunkelberg, chief economist at the National Federation of Independent Businesses, said hiring plans had plummeted, with the number of firms saying they planned to hire new workers exceeding those planning job cuts by just 3 percent in March, down from 11 percent in the group's February survey.

Government employment generally holds up during a recession because of increased demand for services, although some states are warning of cutbacks due to falling tax revenues. Federal, state and local governments added 18,000 jobs in March, according to Friday's jobs report.

Bernard Baumohl, managing director of the Economic Outlook Group, said the new jobs report showed a number of other labor market strains, including the sixth straight monthly increase in the number of workers taking part-time jobs because they could not find full-time positions. That figure now stands at its highest level in 14 years.

Nigel Gault, chief U.S. economist at Global Insight, said he believed the overall economy, as measured by the gross domestic product, fell by a small 0.1 percent at an annual rate in the January-March quarter this year, and would drop at a larger 0.7 percent rate in the current quarter. By one classic definition, a recession occurs when GDP is negative for two consecutive quarters.

Gault said he expected a mild recession that will end when tax rebate checks are spent this summer. He said he wasn't looking for as big a rise in unemployment as the 2001 downturn because companies have not added as many workers to their payrolls during the current expansion.

"We think companies are starting from a leaner position so they won't have to lay off as many people," he said.

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