Job Losses Are Worst in 20 Years

The nation’s unemployment rate shot up to 5.7% in November as the job loss total for the last two months hit 800,000, the worst performance in more than two decades.

The Labor Department report Friday showed just how devastating the Sept. 11 terrorist attacks were on the labor market, prompting huge layoffs across a wide swath of the U.S. economy, with airlines and other travel-related industries particularly hard-hit.

The worse-than-expected numbers also dashed hopes raised by other reports that the current recession, the country’s first in 10 years, will soon be ending.

“The rumors of a recovery were premature,” said David Wyss, chief economist at Standard & Poor’s Co. in New York. “We are still in a recession and we will be for some months to come.”

Wall Street fell on the news, with the Dow Jones industrial average closing down 50 points at 10,049.

President Bush and other Republicans used the dismal report to try to increase pressure on Democrats in Congress to drop their objections to the administration’s economic stimulus program, which Bush sent to Congress in October.

“Since then over three-quarters of a million Americans have lost their jobs,” Bush said in a statement. “Today’s important economic warnings demonstrate that America’s workers have already waited too long.”

But Democrats charged that the rising unemployment level underscored their demands that Bush’s package needs to be changed to offer less in tax cuts for the wealthy and more in help for thousands of people now out of work.

Analysts said the impasse over the stimulus bill made it more likely that the Federal Reserve Board, which has already cut interest rates 10 times, will cut rates an 11th time at its final meeting of the year next Tuesday.

Some predicted the rate cut would be another half-point move, given the size of the job losses in November, but others looked for a smaller quarter-point move given that a key Fed interest rate is already at a 40-year low of 2%.

The National Bureau of Economic Research has ruled that the country’s first recession in a decade actually began in March, but the six-member business cycle dating committee said that without the jolt the economy received from the Sept. 11 attacks it is very possible that the slowdown would not have been severe enough to qualify as a recession.

Labor Secretary Elaine Chao, briefing reporters on the jobless report, said that the widespread layoffs in the last two months were “signs of the economic havoc wrought on our country” by the terrorist attacks. “In March, the economic expansion stopped and on Sept. 11 the Bin Laden recession began,” she said.

Economists attributed part of the severity in the job cutbacks to the severe profit squeeze currently facing many corporations, predicting further layoffs in the months to come.

“With profit margins at a post-World War II low, hundreds of thousands of more jobs probably will need to go to restore profitability,” said Bruce Steinberg, chief economist at Merrill Lynch.

He predicted that the recession will last through the winter and the jobless rate will climb close to 7% next year before a rebound in economic growth triggers new hiring. That would still make this a mild downturn. The last recession in 1990-91 saw the unemployment rate hit 7.8% with a job loss of 1.8 million.

Since employment peaked in March, 1.2 million Americans have lost their jobs.

Business payrolls have declined for four straight months, but the job losses dramatically accelerated in October, when 468,000 jobs were cut, and November, when another 331,000 Americans lost jobs. That was the biggest two-month job drop since 1980.

A separate report Friday showed that consumers, even in the face of rising layoffs, boosted their borrowing in October by $7 billion, a growth rate of 5.2%, reflecting a big rise in auto loans spurred by zero-interest-rate financing offers.

The 5.7% jobless rate last month, the highest level since August 1995, followed an increase to 5.4% in October, the first month that layoffs from the terrorist attacks began to show up in the government statistics. Just a year ago, the unemployment rate was down to a 30-year low of 3.9%.

For November, the government reported that factory employment fell by 163,000, bringing the total number of manufacturing jobs lost since July 2000 to 1.2 million.

The services industry, where most Americans work, lost 70,000 jobs in November, with hotels cutting 7,000 jobs and amusement and recreation parks reducing employment by 25,000, layoffs that reflect the big hit the travel industry has taken since Sept. 11.

One sector that has seen a boom in employment in the last two months is guard services, which added 15,000 jobs in November after gaining 14,000 jobs in October.