U.S. Jobless Rate Rises to 5.9%, a 3-Year High : Economy: Some see November figures confirming fears that a moderately severe recession has hit.
The nation’s rapidly slowing economy shed 267,000 jobs in November, causing unemployment to rise to a three-year high of 5.9%, the Labor Department said Friday in a report that confirmed for many economists their fears that the long-heralded recession has arrived.
The unemployment rate, although still well below the levels recorded during the last recession in 1982, was the highest since just after the 1987 stock market crash. The rate has jumped 0.6 of a percentage point in 12 months.
“This report proves conclusively that the economy is in recession and that it’s not going to be short and sweet, but moderately severe,” said Bruce Steinberg, a Merrill Lynch economist in New York.
The number of gainfully employed Americans fell by 450,000 in November, according to a Census Bureau survey of U.S. households. But the government reported that 168,000 people dropped out of the labor force, resulting in a net increase in unemployment of 282,000.
The discrepancy between the employment and jobless numbers reflects an inevitable byproduct of recession: In economic downturns, many people stop looking for work and the government stops counting them as part of the labor force.
The government’s companion survey of payroll employment in manufacturing, construction, services and government showed losses in every sector except government.
The overall decline of 267,000, the worst monthly job loss since the depths of the 1982 recession, was considerably greater than expected. The November loss followed an October drop in payroll employment of 178,000, for a combined two-month total of 445,000.
In November, the brunt once again was borne by the manufacturing sector, which has lost more than 800,000 jobs since January, 1989. The decline in factory payrolls, as industries scramble to cut costs and hold down inventories, was 200,000. The slumping auto industry alone accounted for 54,000 layoffs.
The construction industry lost 62,000 jobs, reflecting a slump in commercial real estate that has hit depression levels in the Northeast and is accelerating rapidly on the West Coast. Construction unemployment and the loss of defense jobs contributed to a big jump in unemployment in California, to 6.7% last month from 6% in October.
The slump extended to the service sector, which once was thought to be relatively immune to business cycle contractions but has lost jobs for two months in a row.
Excluding a small gain of 3,000 in government employment, mostly at the state and local levels, private-sector service industries sloughed off 15,000 jobs. A gain of 59,000 new jobs in medical services--perhaps the only recession-proof sector of the economy--was more than offset by 68,000 lost retail jobs and smaller declines in financial services.
The retail employment slump was caused by smaller than expected seasonal hiring, as department stores hunker down for a holiday shopping season expected to be dismal.
“Just about every industry had a decline in jobs except health care,” said Steinberg, the Merrill Lynch economist. “And, while manufacturing industries are more sharply down, as is the case in every recession, in this case we are seeing services down more than usual. The mix of this slowdown may be different than in the past.”
To some analysts, that different mix was cause for muted optimism. Because the job losses in manufacturing have been so steep at a time when inventories have been at historically low levels at the outset of a recession, they said that the worst could be over soon.
“I have a sense that, with some hopes of a non-military solution in the Persian Gulf, with oil prices and interest rates lower, you could see a rebound in consumer confidence in December,” said economist Lawrence Kudlow of Bear Stearns in New York.
“We’ll be seeing the economy drop this quarter, but there is a good case to be made for improvement early next year,” added Giulio Martini of Sanford Bernstein & Co. in New York.
Martini noted that inventories in goods-producing industries are very lean, increasing the probability of a production upturn as soon as consumers start buying again. Some of those consumers are overseas, and exports should be stimulated by the devalued dollar, he said.
Martini noted that the big drop in retail employment was in part a seasonal adjustment caused by less hiring of temporary holiday workers. The reverse of that process should occur in January, when smaller post-holiday layoffs should produce a statistical recovery.
“This is the most anticipated recession in history,” Jerry Jordan of First Interstate Bancorp in Los Angeles observed. “Unless there is war in the Middle East, we think this negative sentiment can reverse about as quickly as it started.”