Recession fears are back with a bang after the Labor Department reported Friday that the nation's unemployment rate leapt to 6. 1 percent in August...
WASHINGTON — Recession fears are back with a bang after the Labor Department reported Friday that the nation’s unemployment rate leapt to 6.1 percent in August, employers shed jobs for the eighth consecutive month and revised numbers for earlier months showed even greater payroll hits.
The dismal numbers released Friday go beyond the job market. Mortgage foreclosures rose 1.2 percent in the second quarter, according to the Mortgage Bankers Association, the highest rate of increase in the 29-year history of the survey.
The job losses, 84,000 in August alone, combined with falling home equity, the rising cost of food, health care and housing and tighter credit have put the squeeze on middle-class families, a situation that’s at the forefront of the presidential campaign.
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• While hourly wages have grown 3.6 percent compared with last year, they’re being outpaced by inflation. The most recent figures, for July, show prices up 5.6 percent over 2007.
• Food and beverage costs are up 5.8 percent from July 2007 to July 2008 — and jumped 8 percent in the past three months.
• Many companies have cut employee health coverage or shifted more costs to workers. Currently, average annual worker contributions for single and family coverage are $694 and $3,281, respectively, according to the Kaiser Family Foundation. But 59 percent of U.S. businesses plan to increase employee deductibles, co-payments and out-of-pocket spending limits next year, according to Mercer, a consulting firm.
The jobs report provided prime fodder for both presidential nominees as the campaign season kicked into high gear. Sens. Barack Obama and John McCain said they would favor an economic-stimulus package from Congress this fall.
And Obama jumped on the report, saying Democrats would do more to help struggling Americans.
“You would think that George Bush and his potential Republican successor, John McCain, would be spending a lot of time worrying about the economy and all these jobs that are being lost on their watch,” he said in Duryea, Pa. But, “if you watched the Republican National Convention over the last three days, you wouldn’t know that we have the highest unemployment rate in five years.”
McCain said that “Americans are hurting and we must act to create jobs.” He added that “as president, I will enact a jobs-for-America economic plan that creates jobs, helps small businesses, expands opportunities and opens markets to American goods.”
The joblessness front
As was made clear Friday, the job market has gone from mediocre to lousy. A closer look at the unemployment numbers:
• The number of people out of work for six months or more jumped by 160,000 from July to August, and the number of workers who want full-time employment but can’t find it has hit 10.7 percent.
• 605,000 jobs have been lost since January.
• The private sector dropped more than 100,000 jobs in August, with losses in most areas, including the service sector, which represents the lion’s share of payrolls. Health care, education and government were among the few sectors posting payroll gains, partially offsetting job losses.
• The manufacturing sector shed 61,000 positions, the most in five years. The sector has lost 20 percent of its jobs — one job of every five — during the past seven years.
• Original estimates for June and July were revised, with the Labor Department saying an additional 58,000 jobs had disappeared in those months. Nearly all represented cuts by state and local governments.
• As the number of available jobs declined, an additional 250,000 people entered the labor pool.
• Even college graduates are feeling the pinch. Their 2.7 percent unemployment rate is the highest since 2004, while the 9.6 percent unemployment rate for workers without a high-school diploma is the highest since 1996.
“Recession written all over it”
While the nation’s gross domestic product remained relatively solid in the second quarter, thanks in part to economic-stimulus checks, the labor market has been sending a much darker signal.
Friday’s data “add weight to the case that the economy is in a recession,” said Nomura economist David Resler.
BMO Nesbitt Burns economist Michael Gregory said the report “has recession written all over it.”
The latest figures were “not a pretty sight,” said Naroff Economic Advisors head Joel Naroff, adding that the disappearance of 605,000 U.S. jobs this year is “raising questions about the strength of the economy going forward.”
And Robert Barbera, chief economist at the Investment Technology Group, said, “The debate about whether or not this is a recession is foolish. This is a recession.”
Prices for oil and other commodities are dropping from recent highs. However, prices for energy and food remain well above what they were a year ago, and consumers will face higher heating bills as the weather turns cold.
The weak job market is hurting even those who still have their jobs, in that workers have less leverage with which to negotiate raises.
“What is worrisome is that more full-time workers have been laid off, more people are being forced to work part time who want to work full time, and more people are trying to get multiple jobs to make ends meet,” said Bruce Kasman, chief economist of J.P. Morgan Chase.
Compiled from McClatchy Newspapers,
The Washington Post, Chicago Tribune and The New York Times