The nation's jobless ranks zoomed past 10 million last month, the most in a quarter-century, as piles of pink slips shut factory gates and office doors to 240,000 more Americans with the holidays nearing.
WASHINGTON — The nation’s jobless ranks zoomed past 10 million last month, the most in a quarter-century, as piles of pink slips shut factory gates and office doors to 240,000 more Americans with the holidays nearing. Politicians and economists agreed on a painful bottom line: It’s only going to get worse.
The unemployment rate soared to a 14-year high of 6.5 percent, the government said Friday, up from 6.1 percent just a month earlier. And there was more grim news from U.S. automakers: Ford and General Motors, American giants struggling to survive, each reported big losses and figured to be announcing even more job cuts before long.
Still, the Labor Department’s unemployment report provided stark evidence that the economy’s health was deteriorating at an alarmingly rapid pace. The jobless rate was 4.8 percent just one year ago.
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About 10.1 million people were unemployed in October, the most since the fall of 1983. More people have jobs now, since the population has grown, but it’s still a staggering jobless figure. With employers slashing jobs every month so far this year, some 1.2 million positions have disappeared, over half in the past three months alone.
“There is no light at the end of the tunnel, and the outlook is pitch-black,” said Richard Yamarone, economist at Argus Research.
And Bernard Baumohl, chief global economist at the Economic Outlook Group, said the report “depicts an economy still in free fall and without a safety net anywhere in sight.”
October’s jobless rate was the highest since March 1994 and now has surpassed the 6.3 percent 2003 high after the most recent recession. The government also said job losses were worse than first reported for the preceding two months, 284,000 rather than 159,000 in September and 127,000 rather than 73,000 in August.
Many economists believe the unemployment rate will climb to 8 or 8.5 percent by the end of next year before slowly drifting downward. Some think unemployment could even hit 10 or 11 percent — if an auto company should fail.
The rate is likely to move higher even if the economy is on somewhat stronger footing by the middle of next year as some hope. That’s because companies won’t be inclined to ramp up hiring until they feel certain that a recovery has staying power.
Jared Bernstein, a labor economist with the Economic Policy Institute, noted that job losses are a “lagging” phenomenon. That is, unemployment tends to peak well after the economic shocks that cause it, and take longer to abate even after the economy recovers.
He noted that the lag has lengthened in recent business cycles, taking roughly two years after a recession for the economy to regain the lost jobs.
“Employers often wait to be sure that the economy is really tanking before laying people off in earnest. And they want to be quite sure that consumers are back before they take on other workers,” Bernstein said. “Unfortunately, that lag has gotten a lot longer in recent years.”
Joshua Shapiro, chief economist at consulting firm MFR, said another reason the unemployment rate can keep climbing — even after a recession is over — is because people tend to flock back to the labor market when they sense their job prospects might be better. “It takes (people) awhile to figure out, ‘Hey, there’s jobs out there,’ ” Shapiro said.
In the 1980-1982 recession — considered the worst since the Great Depression in terms of unemployment — the jobless rate rose as high as 10.8 percent in late 1982 just as the recession ended, before inching down.
Friday’s report was worse than analysts had expected. They had been forecasting a jobless rate of 6.3 percent with payrolls falling about 200,000.
Factories, including automakers, construction companies, especially homebuilders, retailers, mortgage bankers, securities firms, hotels and motels and educational services, all cut jobs. As did temporary-help firms — a barometer of future hiring. All those losses more than swamped the few gains elsewhere, including in the government, health care and in accounting and bookkeeping.
Workers with jobs saw only modest wage gains last month. Average hourly earnings rose to $18.21, a 0.2 percent increase from the previous month. Over the past year, wages have grown 3.5 percent, but paychecks aren’t stretching far because high food, energy and other prices have propelled overall inflation at a faster pace.
The economy has lost its footing in just a few months. It contracted at a 0.3 percent pace in the July-September quarter, signaling the onset of a likely recession. It was the worst showing since the 2001 recession, and reflected a massive pullback by consumers.
As consumers lose jobs or watch jobs disappear, they’ll retrench even further, spelling more trouble. Analysts say the economy is still shrinking in the current October-December quarter and will contract further in the first quarter of next year. All that more than fulfills a classic definition of a recession: two straight quarters of contracting economic activity.
“The U.S. recession is deepening,” said Michael Gregory, economist at BMO Capital Markets Economics. The final quarter of this year is getting off to a “particularly ugly” start.
Associated Press reporter Christopher S. Rugaber and
Los Angeles Times reporter
Maura Reynolds contributed
to this report.