- The Washington Times - Friday, January 9, 2009

UPDATED:

Wall Street sank Friday following a Labor Department report showing that 524,000 people lost their jobs in December, boosting the unemployment rate to 7.2 percent — the highest in 16 years. The Dow fell more than 140 points.

About 2.6 million people lost their jobs in 2008, the agency said.

The market tanked in the last half hour during a day of light trading after coming off some of its losses earlier, with two of the major indexes dropping by more than 2 percent and the Standard & Poors 500 diving below 900. The Dow declined 4.8 percent for the week, its worst showing since November, CNBC said.

At the close, the Dow Jones Industrial Average dropped 143.28, or 1.64 percent, to 8686.23. The tech-heavy Nasdaq sank 45.42, or 2.81 percent, to 1571.59. The broader S&P 500 declined 19.38, or 2.13 percent, to 890.35.

The Commerce Department reported that businesses cut their inventories for the third consecutive month in November because of declining wholesale sales that plunged a record 7.1 percent that month. Inventories dropped 0.6 percent in November, the agency said, smaller than the 0.8 percent economists had expected.

The previous record for a drop in wholesale sales was a 4.5 percent decline in October.

Bernard Baumohl, chief global economist for the Economic Outlook Group in Princeton, N.J., told The Washington Times that the jobless numbers added up to a terrifying report. He predicted unemployment will continue at the rate of half a million people a month for several months to come.

Theres nothing to suggest that the worst is over or that were going to see unemployment bottom out, he said. The momentum is getting worse and worse and job losses are accelerating dramatically. Its going to be a very difficult and, for many, a very traumatic year.

Mr. Baumohl said the true unemployment figure for all of 2008 is 2.77 million, not 2.59 million, because 181,000 people were hired by federal, state and local governments during the year. That 2.77 million people were dismissed from private sector jobs represented unemployment at its worst since 1940, he said.

That was before the United States entered World War II.

Wall Streets reaction to the jobless figures was milder than might have been expected, Mr. Baumohl said, because it already has digested much of the unemployment news and is looking ahead to President-elect Barack Obamas estimated $775 billion economic aid package.

But, he said, the markets are concerned that debate in Congress over the size and shape of the package might delay its adoption.

As an example, he said, Mr. Obamas plan to give a $3,000 tax reduction to businesses for every person they hire is illogical because firms will not take on new employees until the economy improves.

But, he said, the tax cut proposal may be a sop to Republicans so that they will vote for the stimulus package.

The markets are saying that they want to see the package passed quickly that this is an emergency measure that needs to be done quickly, Mr. Baumohl said.

In addition, he said, Wall Street is expecting an economic turnaround by the second half of the year, including an improvement in corporate earnings. If it were not expecting that, he said, its reaction to the jobless figures would have been much worse.

Futures prices for a barrel of light, sweet crude oil slipped below $40 after release of the jobs report, an indication that the worsening recession will mean that demand for oil will weaken.

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