The New York Times
PETER S. GOODMAN and MICHAEL M. GRYNBAUM
Published: November 7, 2008
Squeezed by tight credit and plunging spending power, the American economy is shedding jobs at the fastest pace since 2001, and the losses could accelerate to levels not seen since the deep recession of the early 1980s.
Employers shed another 240,000 jobs in October, the government reported Friday morning, the 10th consecutive monthly decline and a clear signal that the economic slowdown is assailing households and businesses.
Since August, the economy has lost 651,000 jobs — more than three times as many as were lost from May to July. So far, 1.2 million jobs have been lost this year.
“Clearly, these are very bad numbers,” said Nigel Gault, chief domestic economist at IHS Global Insight.
“Businesses had been paring back for most of the year, but I suspect that it had been more caution on hiring rather than firing,” Mr. Gault said. “In September, they decided, ‘O.K., look, this isn’t just a mini-recession, this is a full blown recession. We better take some action.’ And they did.”
The unemployment rate climbed to 6.5 percent, the highest level since 1994 and up from 6.1 percent the month before.
The Labor Department also steeply revised down its employment numbers for the third quarter. Employers slashed 284,000 jobs in September, far higher than the 159,000 that was initially reported. In August, 127,000 jobs were lost, compared to the previous estimate of 73,000.
“The U.S. consumer, which for so many years was the global engine of growth, is now the world economy’s Achilles heel,” Joshua Shapiro, an economist at MFR, a research firm, wrote in a note.
The latest signs of distress seemed certain to inject more urgency into the debate over another round of government stimulus to spur spending, and is more evidence that President-elect Barack Obama will inherit a deeply troubled economy.
Mr. Obama has in recent months called for another package of so-called stimulus spending initiatives. Democratic leaders in the House suggested this week that they might seek swift passage of $60 billion worth of measures that would extend unemployment benefits and food stamps, while aiding states whose tax revenues have plummeted. They would then pursue a broader package that could reach $200 billion in spending once Mr. Obama takes office.
The Bush administration has criticized Democratic proposals for immediate aid, raising the specter of a veto.
On Friday, a spokeswoman for President Bush, Dana Perino, called the employment numbers “a stark reminder of how critical it is we keep focused on utilizing” the programs that Washington has put in place, including a $700 billion bailout of the financial system.
“We know what the main problems are — tight credit and housing markets — and we have the tools to solve them,” Ms. Perino said. “The programs we’re putting in place will improve the flow of credit to consumers and businesses that will spur economic growth, job creation, and stabilization of our financial markets.”
Above all, the latest monthly snapshot of the jobs market reinforced how the economy remains gripped by a potent combination of troubles — plunging housing prices, tight credit and shrinking paychecks — with all three operating at once in a downward spiral.
Companies have been hiring tepidly and laying off workers throughout the year as business has slowed, while cutting working hours for those on the payroll. Millions of Americans accustomed to borrowing against homes to finance spending have lost that artery of cash as home prices have fallen.
Wages have effectively shrunk for most workers, as rising costs for food and fuel have more than absorbed meager increases in pay. That has further crimped American proclivities to spend.
In October, weekly wages for rank-and-file workers — those not in supervisory or managerial positions — grew just 2.9 percent from October 2007, well below the rate of inflation.
The health care industry and public schools were the only sectors of the economy that showed more than notional growth last month. Otherwise, the losses were deep and broad. The troubles in the auto industry led to thousands of layoffs at car dealerships and factories that produce car parts. Tens of thousands of workers at manufacturers and construction companies lost their jobs.
Janitors, administrative workers and temporary employees were hit hard, with 57,000 jobs lost in October. Even general merchandise stores, which have seen an increase in business because of lower prices and more budget-minded consumers, laid off 18,000 workers last month.
The 284,000 jobs lost in September was the biggest monthly toll since November 2001, in the aftermath of the terrorist attacks in New York and Washington.
All of this has cut into spending power. Consumer spending dropped between July and September — the first quarterly decline in 17 years — further eroding the motivation for businesses to hire.
Friday’s report offered signs that the pressures on workers are rapidly intensifying. Between January and August, the economy lost about 75,000 jobs a month, according to preliminary numbers from the Bureau of Labor Statistics. The pace has more than doubled since then.
Many economists now expect the unemployment rate to reach 8 percent by the middle of next year, a level not seen in 25 years. Most forecasts envision the economy shrinking well into the next year and perhaps until 2010.
Recent days have offered fresh indications of trouble. On Thursday, several retailers announced sharp declines in sales in October, suggesting that consumer spending will continue to tighten. The annual pace of auto sales fell off sharply in October, down 15 percent compared to September, according to analysis from Goldman Sachs.
The widely watched Institute for Supply Management survey fell in October to depths last seen 26 years ago, reflecting shrinking industrial activity and suggesting weakening demand for goods as the economy slows.
That weakness has gone global, as many other major economies also succumb to slowdown — from Spain and Britain to Japan and Brazil — and as financial crisis now snuffs out economic activity in much of the world.
At the same time, banks continued to tighten their purse strings in October, according to a survey of senior loan officers conducted by the Federal Reserve. Economists construed the survey as an indication that even healthy companies and many households were having difficulty securing capital, further braking the economy and making prospects more difficult for American workers.
Many economists expect this picture to worsen as the consequences of the global financial crisis ripple out to businesses and households. Though the $700 billion taxpayer-financed bailout has staved off fears of an imminent collapse and restored some order to the financial system, it has not persuaded banks to lend freely. Credit remains tight for businesses and homeowners.
http://www.nytimes.com/2008/11/08/business/economy/08econ.html
PETER S. GOODMAN and MICHAEL M. GRYNBAUM
Published: November 7, 2008
Squeezed by tight credit and plunging spending power, the American economy is shedding jobs at the fastest pace since 2001, and the losses could accelerate to levels not seen since the deep recession of the early 1980s.
Employers shed another 240,000 jobs in October, the government reported Friday morning, the 10th consecutive monthly decline and a clear signal that the economic slowdown is assailing households and businesses.
Since August, the economy has lost 651,000 jobs — more than three times as many as were lost from May to July. So far, 1.2 million jobs have been lost this year.
“Clearly, these are very bad numbers,” said Nigel Gault, chief domestic economist at IHS Global Insight.
“Businesses had been paring back for most of the year, but I suspect that it had been more caution on hiring rather than firing,” Mr. Gault said. “In September, they decided, ‘O.K., look, this isn’t just a mini-recession, this is a full blown recession. We better take some action.’ And they did.”
The unemployment rate climbed to 6.5 percent, the highest level since 1994 and up from 6.1 percent the month before.
The Labor Department also steeply revised down its employment numbers for the third quarter. Employers slashed 284,000 jobs in September, far higher than the 159,000 that was initially reported. In August, 127,000 jobs were lost, compared to the previous estimate of 73,000.
“The U.S. consumer, which for so many years was the global engine of growth, is now the world economy’s Achilles heel,” Joshua Shapiro, an economist at MFR, a research firm, wrote in a note.
The latest signs of distress seemed certain to inject more urgency into the debate over another round of government stimulus to spur spending, and is more evidence that President-elect Barack Obama will inherit a deeply troubled economy.
Mr. Obama has in recent months called for another package of so-called stimulus spending initiatives. Democratic leaders in the House suggested this week that they might seek swift passage of $60 billion worth of measures that would extend unemployment benefits and food stamps, while aiding states whose tax revenues have plummeted. They would then pursue a broader package that could reach $200 billion in spending once Mr. Obama takes office.
The Bush administration has criticized Democratic proposals for immediate aid, raising the specter of a veto.
On Friday, a spokeswoman for President Bush, Dana Perino, called the employment numbers “a stark reminder of how critical it is we keep focused on utilizing” the programs that Washington has put in place, including a $700 billion bailout of the financial system.
“We know what the main problems are — tight credit and housing markets — and we have the tools to solve them,” Ms. Perino said. “The programs we’re putting in place will improve the flow of credit to consumers and businesses that will spur economic growth, job creation, and stabilization of our financial markets.”
Above all, the latest monthly snapshot of the jobs market reinforced how the economy remains gripped by a potent combination of troubles — plunging housing prices, tight credit and shrinking paychecks — with all three operating at once in a downward spiral.
Companies have been hiring tepidly and laying off workers throughout the year as business has slowed, while cutting working hours for those on the payroll. Millions of Americans accustomed to borrowing against homes to finance spending have lost that artery of cash as home prices have fallen.
Wages have effectively shrunk for most workers, as rising costs for food and fuel have more than absorbed meager increases in pay. That has further crimped American proclivities to spend.
In October, weekly wages for rank-and-file workers — those not in supervisory or managerial positions — grew just 2.9 percent from October 2007, well below the rate of inflation.
The health care industry and public schools were the only sectors of the economy that showed more than notional growth last month. Otherwise, the losses were deep and broad. The troubles in the auto industry led to thousands of layoffs at car dealerships and factories that produce car parts. Tens of thousands of workers at manufacturers and construction companies lost their jobs.
Janitors, administrative workers and temporary employees were hit hard, with 57,000 jobs lost in October. Even general merchandise stores, which have seen an increase in business because of lower prices and more budget-minded consumers, laid off 18,000 workers last month.
The 284,000 jobs lost in September was the biggest monthly toll since November 2001, in the aftermath of the terrorist attacks in New York and Washington.
All of this has cut into spending power. Consumer spending dropped between July and September — the first quarterly decline in 17 years — further eroding the motivation for businesses to hire.
Friday’s report offered signs that the pressures on workers are rapidly intensifying. Between January and August, the economy lost about 75,000 jobs a month, according to preliminary numbers from the Bureau of Labor Statistics. The pace has more than doubled since then.
Many economists now expect the unemployment rate to reach 8 percent by the middle of next year, a level not seen in 25 years. Most forecasts envision the economy shrinking well into the next year and perhaps until 2010.
Recent days have offered fresh indications of trouble. On Thursday, several retailers announced sharp declines in sales in October, suggesting that consumer spending will continue to tighten. The annual pace of auto sales fell off sharply in October, down 15 percent compared to September, according to analysis from Goldman Sachs.
The widely watched Institute for Supply Management survey fell in October to depths last seen 26 years ago, reflecting shrinking industrial activity and suggesting weakening demand for goods as the economy slows.
That weakness has gone global, as many other major economies also succumb to slowdown — from Spain and Britain to Japan and Brazil — and as financial crisis now snuffs out economic activity in much of the world.
At the same time, banks continued to tighten their purse strings in October, according to a survey of senior loan officers conducted by the Federal Reserve. Economists construed the survey as an indication that even healthy companies and many households were having difficulty securing capital, further braking the economy and making prospects more difficult for American workers.
Many economists expect this picture to worsen as the consequences of the global financial crisis ripple out to businesses and households. Though the $700 billion taxpayer-financed bailout has staved off fears of an imminent collapse and restored some order to the financial system, it has not persuaded banks to lend freely. Credit remains tight for businesses and homeowners.
http://www.nytimes.com/2008/11/08/business/economy/08econ.html
