Just when many economists thought the economic recovery might be gaining a little momentum, reality comes along and throws a big bucket of icy cold water on the party. The employment report was by far the worst in a week where economic data had been signaling at least some improvement. Net job losses accelerated to 263,000 and the unemployment rate rose to 9.8 percent in September. Other surveys had shown the pace of layoffs slowing down, so many analysts thought this might carry over to the jobs data. No such luck. Moreover, the report showed that many who were let go early in the recession have remained jobless for a long time. Indeed, the median duration (or spell in econospeak) of unemployment is now over 17 weeks and nearly 36 percent of unemployed workers have remained jobless for more than 6 months—a record for a data series that stretches back to 1948. The economic recovery can proceed even if net job losses continue, as the two previous business cycles illustrate; however, the size of the unemployment problem is much larger this time around and could prove a big limiting factor to growth going forward.

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