- The Washington Times - Saturday, January 10, 2009

The nation’s unemployment rate soared last month to 7.2 percent, the highest in nearly 16 years, as businesses laid off another 524,000 workers in nearly every industry from manufacturing to retailing, the Labor Department reported Friday.

The huge job loss in December followed an even bigger 584,000 job drop in November and brought to nearly 2 million the number of people who have lost jobs just in the four months since a severe financial downturn struck the United States in September. The total number of jobs eliminated last year was 2.6 million — the worst performance since 1945.

The report showed stunning weakness in the job market that economists fear will set off another downward spiral in the economy. Workers who are laid off or worried about their jobs will reduce spending, which fuels 70 percent of economic activity and already is running at the lowest level in decades.

Employers slashed hours as well as jobs in their scramble to bring costs in line with plummeting sales and revenues, driving the average workweek to a record low 33.3 hours, the department said. Economists say the sharp drop in hours indicates the economy contracted at an astonishing 7 percent rate in the final quarter of the year.

“The economy is on such a steep downhill, it is scary,” said Sung Won Sohn, economics professor at California State University, Channel Islands. “There is no indication that the job situation would stabilize anytime soon,” he added. “This could turn out to be one of the worst economic setbacks since the Great Depression.”

Businesses as well as consumers are convinced that hard times are here to stay.

“More and more businesses are cutting jobs in anticipation of tougher times. This is especially true for retail, manufacturing and finance, which accounts for the bulk of jobs in the country,” Mr. Sohn said. “Shell-shocked consumers are keeping their wallets closed and avoid using credit cards. They buy only necessities on sale, hurting retailers´ margins and prompting more store closings and layoffs.”

The crisis in the auto industry dragged down employment both among manufacturers and showrooms, contributing to the loss of 149,000 factory jobs and reducing the number of manufacturing jobs to less than 13 million for the first time since 1942. Retailers also have been cutting jobs at record rates, with auto sales positions accounting for nearly a third of the 522,000 retail jobs eliminated last year.

The only sectors that weren’t ravaged by job cuts were health care, education and government, which managed to eke out small job gains despite the weakening economy.

The half-percentage point leap in the unemployment rate to 7.2 percent affected all workers, from adult men to Hispanic teenagers. The unemployment rate has soared at a breathtaking pace not seen since the deep 1980 recession, jumping by more than two percentages points from 4.9 percent at the start of the current recession in December 2007.

Economists note that the number of unemployed workers is actually much higher - perhaps higher than 13 percent - when a surge in workers who are too discouraged to look for jobs is added in, along with people who are working part time because they can’t find full-time jobs.

“The really bad news is that there´s no reason to expect this trend to reverse,” said Richard Yamarone, economist at Argus Research Corp., who expects the economy will continue to lose half a million jobs a month for a while longer.

Strenuous efforts by the Federal Reserve, Treasury and Congress to revive the economy through aggressive interest rate cuts and loans to banks and auto companies have not produced a quick turnaround.

The massive $775 billion stimulus package President-elect Barack Obama is planning will take weeks or months to filter down to consumers and businesses, Mr. Yamarone said.

“There´s a big boost coming from plunging energy prices and a massive stimulus from the easiest monetary policy in recent history,” he said. “But currently there are no fiscal measures at work to stem this steep deceleration. At the very earliest, we believe some sort of fiscal package could be implemented by mid-March.”

Mr. Obama called the jobs report a “stark reminder” of why Congress needs to act swiftly on his plan.

“Clearly the situation is dire. It is deteriorating,” he said at a news conference in Washington, stressing his willingness to work with Congress to fashion a bill that can pass quickly. “What we can´t do is drag this out when we just saw another half a million jobs lost.”

Some analysts caution that Congress should be careful to ensure the stimulus package includes measures that are designed to work effectively and not harm the economy in the long run, noting that the swift passage last fall of the Treasury’s $700 billion bailout fund produced disappointing results in part because it was not clear how the money should or could be used effectively.

“Obama wants to respond in a hurry … but haste can make waste,” said Richard Beales, analyst with Breakingviews.com. It is not clear how and when the government will end all of the massive interventions in the economy it started last year - the kind of details Congress needs to have ahead of time, he said.

“Yet Obama this week sounded a bit like [Treasury Secretary Henry M.] Paulson in early October when he scaremongered an initially reluctant Congress into hurrying through” the bank bailout bill, he said.

While the December jobs report was dismal for workers, it was not quite as bad as many on Wall Street feared. A series of dire reports signaling big job losses during the month had led some forecasters to predict job losses as high as 750,000.

The Dow Jones Industrial Average closed down 143 points on news of the jobs drop, while other major stock indexes lost about 2 percent.

Copyright © 2016 The Washington Times, LLC. Click here for reprint permission.

blog comments powered by Disqus

 

Click to Read More

Click to Hide