Layoffs Push Jobless Rate to 6-Year High
The recession deepened and widened in November as employers shed 331,000 jobs across a broad swath of industries and unemployment surged to 5.7%, a six-year high, the government reported Friday
The damage was greater than expected by economists and doused recent hopes that a recovery might be imminent.
“People had started to say the worst was over,” Merrill Lynch senior economist Gerald D. Cohen said. “The payroll employment numbers clearly dispelled that notion.”
November’s figures suggest unemployment could continue rising for months, to levels not seen since the “jobless recovery” of the early 1990s. The splash of cold water is likely to increase pressure on the Federal Reserve to keep trimming interest rates and on Congress to revive efforts to goose the economy with more tax cuts and new spending.
“This should light a fire under the effort to enact a stimulus package,” said Urban Institute President Robert D. Reischauer, a former congressional budget director. “It raises the political cost of failure.”
President Bush called November’s numbers “troubling” and urged lawmakers to move quickly to stimulate the economy. “The most important thing we can do for unemployed workers and those who are concerned about their jobs is to get the economy growing,” Bush said.
Several economists predicted Fed officials will cut short-term interest rates by at least a quarter of a percentage point when they meet Tuesday to assess current conditions. The Fed has cut rates 10 times this year in an effort to kindle a recovery.
“These numbers suggest that the underlying process of destruction of jobs and destruction of income growth is still happening,” Goldman Sachs senior economist Ed McKelvey said. “I don’t think they could look at this and just let it pass.”
The dismal job numbers contributed to stock declines on Wall Street, where the Dow Jones industrial average fell 49.68 points to close at 10,049.46 and the Nasdaq composite index gave up 33.01 points to finish at 2,021.26.
Amid the gloom, there was one glimmer of hope. The University of Michigan’s index of consumer confidence rose in early December, its third consecutive increase. Analysts said the initial reading indicated Americans were slightly more optimistic about conditions now and in the future. U.S. consumer borrowing also rose in October as shoppers bought cars, according to Federal Reserve figures released Friday.
Last month’s unemployment rate of 5.7%, up from 5.4% in October, was the highest level recorded since August 1995. The number of jobless Americans has increased by 2.6 million since unemployment began rising from its recent low of 3.8% in October 2000.
The unemployment rate for African Americans was 10.1% last month; for Latinos, 7.6%.
In another sign of the recession’s toll, the number of people who have been jobless for six or more months rose by 280,000 last month to 1.2 million. The figure has nearly doubled since July.
November’s payroll job reductions of 331,000 come on the heels of a whopping 468,000 decline in October, the first month to register the full effects of the Sept. 11 terror attacks. The last two months alone account for nearly two-thirds of the 1,223,000 jobs eliminated since the recession officially began in March. It is the worst two-month job loss tally in 21 years.
Last month’s losses were broad-based, the government reported. Factory employment fell 163,000, bringing to 1.4 million the number of manufacturing jobs cut since the first wave of the downturn washed across the industrial sector in mid-2000. The biggest cuts were in plants that produce electrical equipment, heavy machinery and fabricated metals.
But as the recession widens, the layoffs are spreading through other sectors. Significant losses were registered last month in services, particularly temporary help agencies, which shed 87,000 jobs. Air transport and recreational employment took big hits too, as Americans cut back on travel and tourism in response to Sept. 11.
The unemployment rate, which is based on a monthly survey of about 60,000 households, is considered a “lagging” indicator, particularly at the end of a recessionary cycle. That means the jobless rate is likely to keep rising for several months after the economy begins to expand.
The payroll jobs figure, which is based on a separate survey of about 350,000 employers, more closely tracks current conditions. Because it is still falling, and at an accelerating rate, economists said it appears unlikely that a recovery is imminent.
One bright spot was the health-care sector, which added 32,000 employees, many of them in hospitals. Smaller gains were posted by guard services, another Sept. 11 beneficiary; car dealers, where no-interest loans are a boon; and financial services, flush from mortgage refinancings.
Before Friday’s job figures were released, some analysts had taken heart from other indicators that seemed to suggest the economy was perking up faster than previously expected. Consumer spending, home sales and factory orders were rising. A stock market rally signaled expectations of a recovery in early 2002.
“I think people were overestimating the signs of strength,” said Merrill Lynch’s Cohen, who expects a recovery to begin in the spring and unemployment to start subsiding by summer. His firm is projecting total job losses of about 2 million during this recession, slightly more than the 1.8 million shed during the 1990-91 downturn but fewer than the 2.8 million lost in the 1981-82 slump.
Dean Baker, co-director of the liberal Center for Economic and Policy Research in Washington, said he expects unemployment to keep going up until the economy begins creating jobs at a rate of 150,000 or so per month.
“Without some really big shot in the arm, we’re not going to get there until very likely late next year and possibly not until 2003,” Baker said.
“It’s not a pretty picture.”
