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Unemployment leaps to 14-year high
The unemployment rate last month soared to 6.5 percent, a 14-year high, as businesses slashed nearly a quarter million jobs, the Labor Department reported Friday morning.
Job losses were deep and widespread across nearly every industry from retailing and office work to construction and manufacturing. Only the health care, education, mining and government sectors avoided the job slaughter and posted modest employment gains.
The 240,000 jobs eliminated last month came on top of a revised 284,000 job cut in September -- far more than originally reported by the department. Together, the figures show how the economy virtually fell off a cliff at the onset of a severe credit crisis that cut off financing for consumers and businesses alike while it caused the failure of major Wall Street firms and banks in quick succession.
"Today, we received monthly job report numbers that reflect the difficult challenges confronting our economy," President Bush said in a statement. "We are in the midst of a global financial crisis, and tight credit markets have made it harder for businesses to borrow the money they need to meet their payrolls, grow, and create new jobs."
Rarely has such an economic blowup spread so quickly to affect average workers even in unrelated industries like aerospace and computers. But manufacturers laid off a stunning 90,000 workers, while construction employment fell by another 49,000 and retailers trimmed staff by another 38,000.
Unemployment rose the most among Hispanics and teenagers, with every group except blacks experiencing a notable increase.
"We're in the teeth of recession," said John Silvia, chief economist at Wachovia Securities. He said the job losses will weigh heavily on consumers, who already have pulled back dramatically from spending in the last two months. And they point to a big drop in the economy in the final quarter of the year.
Harm Bandholz, economist at Unicredit Markets, noted that the job losses in the last two months amount to nearly a half million, and bring the job losses for the year so far to more than 1 million -- clearly pointing to a profound recession.
"This is a nasty development," he said. "While the labor market is already in its worst condition since the 2001 recession, we expect it to weaken further," with the unemployment rate rising as high as 8 percent by the end of next year.
"One of the most important tasks of the newly elected government is, therefore, to help distressed homeowners and to stimulate the labor market, such as by [funding] government-sponsored infrastructure projects," Mr. Bandholz said.
"Today's employment numbers are a stark reminder of how critical it is we keep focused on utilizing the tools we now have to return our country to the strong job creation we had in recent years," said Dana Perino, White House press secretary. "We know what the main problems are tight credit and housing markets and we have the tools to solve them. The programs we're putting in place will improve the flow of credit to consumers and businesses that will spur economic growth, job creation, and stabilization of our financial markets."
The stock market reacted to the dreadful October employment report issued early Friday morning by rising about 1 percent during the first 15 minutes of trading. The Dow Jones Industrial Average, which plunged nearly 1,000 points (9.7 percent) over the previous two days was up 75 points (0.9 percent) during the first quarter-hour of trading Friday. The Standard & Poor's 500 stock index gained 7 points (0.8 percent), and the Nasdaq composite index increased 15 points (1 percent).
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