ANALYSIS: Double-digit unemployment puts pressure on Obama

Washington - US President Barack Obama on Friday signed legislation that extended unemployment benefits for the millions of Americans who can't find work. But US households may need much more help than that, after government figures showed the country's jobless rate jumped to 10.2 per cent in October, up from 9.8 per cent in September. Another 190,000 jobs were lost over the month. The double-digit jobless rate caught economists off guard, and could well raise the pressure on Obama and Congress to do more to halt the slide, perhaps even a second fiscal stimulus package. While the United States may have pulled out of its deep recession, Friday's jobs report signals an increasing disconnect between the recovery in growth and the ongoing struggles of US households. The economy grew at an annual rate of 3.5 per cent in the third quarter, according to a first government estimate issued last week. That growth was better than economists expected, prompting most to predict a more optimistic jobless rate of 9.9 per cent for October. Unemployment always lags behind growth: Companies tend to wait for clear signs of an upturn before hiring new workers again. But the disconnect seems to be greater this time around. 'The magnitude of the gap between output and employment has been very surprising,' Nigel Gault, chief US economist of IHS Global Insight, told the German Press Agency dpa. He is hopeful the wide gap will soon force companies to start hiring again. One sign of the disconnect: US stocks actually rose slightly on Friday and climbed more than 3 per cent for the week. Investors have typically focused more on signs of growth than job creation. 'Despite Wall Street celebrations of what they see as a recovery ... American workers know there can be no recovery unless everyone who wants to work can find a good job,' said Richard Trumka, president of the AFL-CIO, one of the country's top labour unions. There were some positive signs: Companies added temporary workers for the first time since the recession began in December 2007. Short- term employment is considered a signal that firms are poised to hire more broadly. In light of the new job numbers, Gault predicted the jobless rate could now reach 10.5 per cent before starting to fall in the second half of 2010. That will put pressure on politicians to take more action, even if the US has now begun a mild recovery. The legislation Obama signed on Friday marked a rare show of bipartisanship. It allows unemployed who will run out of benefits by the end of the year to claim another 14 weeks of protection. Those in states with especially high jobless rates can claim benefits for 20 extra weeks. The bill also extended popular tax credits for home buyers, which have helped revive a defunct housing market that lay at the centre of the financial crisis. Businesses will also get a tax break through a provision that allows them to include some past losses in their new tax filings. But that is where the cooperation ends. There is some talk of a second stimulus package, on top of the two-year 787-billion-dollar spending measure approved in February. But Congress, sharply divided between pro-spenders and deficit hawks, is unlikely to find a deal. Obama called the jobs report 'sobering' but insisted the stimulus measures had already saved or created some 1 million jobs. He said the administration was considering extra spending on infrastructure, energy efficiency and some form of job-creation tax cuts for businesses. 'I'm confident that we're moving in the right direction,' Obama said. 'And I promise that I won't rest until America prospers once again.' Opposition Republicans insist the first stimulus has done little to stem the job losses. They argue the Obama administration is already running a sky-high budget deficit and warn that more spending will simply make matters worse. 'Americans are asking where are the jobs, and all they're getting from Democrats in Congress is more spending and more debt,' said John Boehner, the top Republican in the House of Representatives.