Obama faces uphill battle to combat rising job loss

CINCINNATI (Reuters) - U.S. President-elect Barack Obama is rounding up experts as quickly as possible to confront America’s economic crisis but people caught up in the nation’s employment downturn don’t see an improvement any time soon.

Joseph Sullivan fills out a form at the Verdugo Jobs Center, a partnership with the California Employment Development Department, in Glendale, California November 7, 2008. REUTERS/Fred Prouser

Just days after Obama was elected on a message of hope and change, government data showed U.S. employers cut 240,000 jobs in October, taking the national unemployment rate to a 14-year high 6.5 percent. So far this year, 1.2 million jobs have been lost -- 651,000 of them in the past three months.

In America’s industrial heartland, the numbers translate to thousands of people desperate for retraining, new careers, fresh advice and just a little hope -- the kind of people who line up to see Carlos Cisneros every Tuesday and Wednesday.

“They’re desperate,” said Cisneros, describing some 3,000 unemployed people who have flocked to his program at Mott Community College in Flint, Michigan, since August 2007.

Twice a week, 22 anxious people are admitted to orientation sessions that Cisneros oversees and then spend two hours trying to find a job retraining program that fits.

While residents of long-suffering Michigan -- home to America’s failing auto industry -- used to at least have the option of moving away to find work, America’s deep economic gloom has left job-seekers bleak everywhere.

“A couple years ago they could go south and have a good chance at finding work,” Cisneros said. “Now where can they go? They used to be frustrated but now they’re scared.”

Does the election of Democrat Obama, who pledged to help the middle class weather job loss and the high cost of health care and tuition, give Cisneros more hope for the future?

“We wish him nothing but the best,” Cisneros said. “But I don’t expect us to be out of this for a while -- longer than a year. I only hope by 2010 we’ll start seeing some changes.”

Economists, too, see higher unemployment ahead.

“I don’t see any improvement in job market for the entire year of 2009,” said Michael Walden, an economics professor at North Carolina State University. “We’re looking at unemployment rate at 8 to 8.5 percent and a million or a million and half more people out of work in 2009.”


Walden said Obama has no choice but to quickly start ramping down expectations so supporters are not disappointed.

“He will need to communicate to people that we have severe economic problems that will take time, that there will not be an easy switch to throw to make everything fine,” Walden said.

But those who helped Obama to victory, including labor unions, argue there is much Obama and the Democratic Congress can do to at least limit job losses in the year to come.

“Our expectations are very high,” said Ron Blackwell, chief economist of the AFL-CIO umbrella group for labor unions. “That’s why we supported Barack Obama.”

The group wants Congress to pass another economic stimulus package before Obama takes office in January that would extend unemployment insurance benefits, increase food subsidies to the poor, help state and local governments that cannot afford to continue programs for the needy, and invest in an infrastructure rebuilding program to create jobs.

Blackwell said the scope of future job losses will depend on how timely and aggressive Obama and the U.S. Congress are.

“I’m confident Barack Obama will meet those goals but it does depend on a program that is much more ambitious than what has been contemplated to this point,” Blackwell said.

Jared Bernstein, an economist at the liberal Economic Policy Institute, said the measures Obama takes could mean the difference between an unemployment rate of 8 percent or higher a year from now, or one closer to 7 percent.

“It’s not like he’s a helpless victim of a weak economy -- there are things he can do,” Bernstein said as he headed to Chicago to attend Obama’s meeting with economic advisers on Friday. He noted that extending the duration of unemployment insurance benefits has a direct impact on economic growth.

Jobless workers can get up to 26 weeks of unemployment insurance. Benefits have already been extended once.

The U.S. economy shrank at a 0.3 percent annual rate in the third quarter, its sharpest contraction in seven years. Economists polled by Reuters think that was just the first of what will be three straight quarters of contraction -- which would be the longest slide in 34 years.

Bernstein said that means even though Obama can limit job losses with aggressive policy, he can’t erase the problem.

“Once he does everything, that doesn’t mean we’re out of the woods,” Bernstein said. “He’s inherited a recession, potentially a deep and long one -- something I wouldn’t wish on any new president.”

Editing by Bill Trott