10% unemployment rate adds to pressure on Obama for more stimulus

The weaker-than-expected Labor Department report Friday showing an official jobless rate of 10.2 percent also suggests the Federal Reserve will maintain near-zero interest rates and other efforts to pump up credit to spark growth, say economists.

The Labor Department report, seen as one of the best indicators of economic momentum, showed job losses narrowed last month to 190,000. Revisions also showed fewer job losses in August and September.

The improvement was not enough, however, to prevent the jobless rate from surging to the first double-digit level for more than 26 years, from 9.8 percent in September.

President Barack Obama called the numbers “sobering” and said his administration was considering “further steps” to spark job growth.

“To that end, my economic team is looking at ideas such as additional investments in our aging roads and bridges, incentives to create jobs and steps to increase the flow of credit to small businesses,” he said.

Analysts said the rise above 10 percent represents a setback for the recovery and Obama's efforts to lift the economy out of recession.

David Rosenberg, chief economist at Gluskin Sheff & Associates, said the economy remains in peril even after the impact of a 787 billion-U.S. dollar stimulus enacted earlier this year.

“The return to job creation is as elusive as ever,” he said.

“It is hard to fathom that, according to the White House estimates earlier this year, the stimulus was supposed to help cap the unemployment rate at 8.5 percent. Here we are today with both an unemployment rate and a fiscal deficit-to-GDP ratio both north of 10 percent.”

Cary Leahey, senior economist at Decision Economics, said the rise in joblessness poses new challenges for Obama.

“If you're a politician in Washington of the Democratic variety, this is far worse than last month,” he said.

“This report is a soft start to the fourth quarter,” he said. “It is consistent with a double-dip (recession) or W-shaped recovery.”

Leahey said that even though the labor market is showing improvement, “the 10 percent figure will grab all the headlines.”

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