Combined with the week's stream of economic data from declining factory orders to diving auto sales, Friday's Labor Department report that employers had cut 159,000 jobs in September left analysts with little doubt that the economy is sinking quickly into a deep recession.
Combined with the week’s stream of economic data from declining factory orders to diving auto sales, Friday’s Labor Department report that employers had cut 159,000 jobs in September left analysts with little doubt that the economy is sinking quickly into a deep recession.
The report also showed that the nation’s unemployment rate was 6.1 percent, unchanged from August but up sharply from 4.7 percent a year ago. Over the last year, the number of unemployed people has risen by 2.2 million to 9.5 million.
Even with Congress’ unprecedented $700 billion financial bailout, the faltering economy and the jobs markets probably will get worse. Many believe the economy will jolt into reverse later this year — if it hasn’t already — and will stay sickly well into next year.
“Whatever the government might or might not do to try to bail out the financial system, a consumer-led recession is upon us, and it promises to be a serious one,” said Joshua Shapiro, chief U.S. economist at forecasting firm MFR.
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Job creation is considered a major indicator of the health of the economy, which needs to add about 100,000 new jobs a month to keep pace with population growth. However, the economy has lost an average 84,000 jobs every month since last December.
“The losses were broad-based. It indicates real caution and concern on the part of businesses,” said Joel Naroff of Naroff Economic Associates in Holland, Pa. “Even with a bailout bill, businesses aren’t going to start hiring because they’ll want to see that it’s working first.
“Everything seems to be pointing to a recession,” Naroff added.
Stuart Hoffman, chief economist for the PNC Financial Services Group, agreed.
“The September report shows clear evidence that we have taken another step down into a deepening recession,” Hoffman said.
The unemployment rate could hit 7 or 7.5 percent by late 2009. If that happens, it would mark the highest since after the 1990-91 recession.
Economists said they expect the job losses to continue and the unemployment rate to climb in coming months.
“A lot of [analysts] think we’re just starting to see the effects of the financial crisis and credit markets on the labor market,” Holzer said.
The pink slips were widespread.
Manufacturers (especially automakers), homebuilders, retailers, securities and investment firms, hotels and motels, accountants and bookkeepers, architects and engineers, and legal services all cut back. So did temporary-help firms — usually a barometer of future hiring.
That overwhelmed employment gains by the government, in education, health and elsewhere.
“The job losses in retail trade, leisure and hospitality and employment services — those are ripple effects,” said Harry Holzer, a labor economist at Georgetown University and a fellow at the Urban Institute.
The biggest losers were manufacturing, which dropped 51,000 jobs last month; and retail, which shed another 40,000 jobs, reflecting consumers’ reluctance to spend.
Construction employment fell by 35,000 jobs; that appears to be the start of a troubling trend, since the sector is especially vulnerable to the credit crunch, as contractors depend on credit to keep long-term projects operational.
The number of long-term unemployed — 27 weeks or more — rose by 167,000 to 2 million. That’s an increase of 728,000 over the past 12 months.
It means that one in five unemployed workers has been jobless for about seven months or more.
Also, the number of people who are working part time for economic reasons rather than choice jumped by 337,000 to 6.1 million in September, an increase of 1.6 million over the past 12 months and a reflection of hard times on Main Street.
These workers were forced into part-time jobs because their hours were cut or they couldn’t find full-time work.
Economic strains were sorely evident. The number of consumer bankruptcy filings rose 29 percent in September from a year ago, the American Bankruptcy Institute said Friday.
Pressure is growing on Federal Reserve Chairman Ben Bernanke to do an about-face and lower a key interest rate in a bid to revive the economy. Many now think that will happen at the Fed’s next meeting Oct. 28-29 or even earlier.
The hope riding on such a move would be to spur nervous consumers — who account for 70 percent of the nation’s economic activity — and businesses to spend more freely.
Compiled from McClatchy Newspapers, The Associated Press and Los Angeles Times