Monday, February 09, 2009
Economic Forecast: BRUTAL (Republicans Giddy because Philosophically This Means Less Government)
February 7th, 2009 1:10 pm
598,000 Jobs Shed In Brutal January
Unemployment Hits 7.6% as Downturn Picks Up Steam
By Neil Irwin and Annys Shin / Washington Post
Conditions for the nation's workers deteriorated last month at an unrelenting pace, new data showed yesterday, adding urgency to the Obama administration's calls for aggressive action to curb job losses and bolster the economy.
The White House has been working on parallel tracks to arrest the economic free fall. While building support for a massive stimulus package, which cleared a crucial hurdle in the Senate last night, the administration has also been cobbling together a rescue plan for the financial system, which the Treasury Department is scheduled to unveil Monday.
Both efforts are designed to improve the nation's employment outlook, by directly creating jobs in the case of stimulus and, in the case of the financial rescue, by steadying the banks that would ordinarily lend to employers seeking to expand.
The need for progress on those fronts seemed more important than ever yesterday, as the Labor Department announced that conditions worsened more than expected last month. The nation's employers shed 598,000 jobs, the most since 1974, driving the unemployment rate to 7.6 percent from 7.2 percent. If the jobless rate keeps rising at the pace it has for the past two months, it will hit double digits in summer and reach its highest rate since the Great Depression by the fall.
Despite the grim data, the Dow Jones industrial average climbed 2.7 percent, or 217.52 points, on anticipation that the Senate would pass the economic stimulus package.
Since the recession began in December 2007, the nation has lost more jobs as a percentage of the labor force than it had at a comparable point in the early 1980s downturn, the worst recession of the post-World War II era. The number of unemployed Americans over the past year has risen by about 4.1 million, equivalent to the entire labor force of Virginia.
"It is almost set in stone now that this will be the worst job market we've seen in the postwar period," said Scott Anderson, a senior economist at Wells Fargo.
Companies in nearly every sector of the economy have cut jobs or announced that they would take other steps to save on costs, including freezing or reducing pay or eliminating contributions to employee retirement programs. Yesterday, Emerson Electric, a global manufacturing and technology company based in St. Louis, became the latest firm to disclose cutbacks, saying it would slash up to 14,000 jobs this year because of lower demand.
President Obama seized on yesterday's dismal news, as he has with other bleak data lately, to press for passage of the economic stimulus package.
"This is not some abstract debate," Obama said at the White House. "It is an urgent and growing crisis that can only be fully understood through the unseen stories that lie underneath each and every one of those 600,000 jobs that were lost this month."
The financial rescue package that Treasury Secretary Timothy F. Geithner plans to lay out next week would aim to save or create jobs by propping up banks and other troubled financial institutions, which in turn should make them able to lend money to businesses that seek to expand or consumers who wish to make purchases. The stimulus package, a mix of tax cuts and new spending, seeks to save or create jobs directly by encouraging retail sales and business investment.
Many of those jobs would probably be concentrated in the manufacturing industry. According to an estimate by economist Mark Zandi of Moody's Economy.com, who has been advising congressional Democrats, an earlier version of the stimulus similar to the package that passed the House of Representatives last month would generate 590,000 manufacturing jobs by the end of 2012. Last month alone, the nation lost 207,000 manufacturing jobs, the largest one-month decline since 1982. Most of those losses were concentrated in companies that make vehicles or related parts and machinery.
William Gaskin, president of the Precision Metalforming Association, a trade organization based in Independence, Ohio, that represents medium-size suppliers to manufacturers across a wide range of industries, said more than half of the group's 1,200 members have cut back their workers' hours or laid people off. Some have cut their workforce by close to half.
"In order to conserve cash, they're having to reduce hours," Gaskin said. "They are trying to work shorter hours to keep people for the rebound, but there comes a time when you've got to release people."
The construction industry, which has been losing jobs since the housing slump began in late 2005 and shed 111,000 jobs in January, would also probably benefit from the stimulus package. Based on the earlier House version of the bill, Moody's estimated that 803,000 construction jobs could be created by the end of 2012.
That would be welcome relief for an industry that has suffered with the slowdown in the building of schools, office towers, apartment buildings and shopping malls.
"Construction was slammed especially hard by the freezing of credit markets in mid-September," said Ken Simonson, chief economist for the Associated General Contractors of America in Arlington. "Developers weren't able to get funding. School districts that had planned to issue tax-exempt bonds [to finance building] discovered there was no market."
Retailers, still reeling from the worst holiday shopping season in decades, shed 45,000 jobs last month. Consumers have shown few signs of returning to stores and malls anytime soon, and analysts expect job losses to keep rising as retailers shrink, merge or go out of business. Moody's estimated that the stimulus, with its payroll tax cuts and other steps to put money in consumers' pockets, would create 752,000 retail jobs by the end of 2012.
"Everyone is battening down the hatches," retail analyst Patricia Edwards said. "There is this recognition that this time [consumers] are serious. They're really not going to spend."
Workers across demographic lines simply cannot afford to spend. While the national unemployment rate is 7.6 percent, the rate among select populations is far higher. The jobless rate among African Americans, for instance, is more than 12 percent; the rate among teenagers is about 21 percent.
Last month alone, a stunning 731,000 Americans stopped looking for work, dropping out of the labor force out of apparent frustration with their employment prospects.
"In the 30-page employment report," said Michael Feroli, a U.S. economist at J.P. Morgan Chase, "there is hardly a number that doesn't convey the brutal conditions in the current job market."