Jobless Surge Spikes Rate to a 5-Year High

U.S. unemployment surged in October as American employers laid off more workers than in any month in the last 21 years, the government said Friday. The report portrayed an economy damaged by the September terrorist attacks and slipping into recession.

The nation’s nonfarm payrolls shriveled by 415,000, the largest loss of jobs since May 1980, when the country was entering the deepest downturn of the post-World War II era. That pushed the jobless rate up half a percentage point to 5.4%, its highest level in almost five years.

The report was far bleaker than economists had expected. Most forecasts had called for payrolls to fall by about 275,000 jobs and predicted the losses would remain largely confined to the manufacturing sector. In fact, the losses were greater and spread across the economy.

“It’s not good news for America,” President Bush said. The Sept. 11 attacks not only took the lives of thousands of Americans, the president said, but now “threatened the livelihoods of thousands of American workers.”

The biggest surprise of the month came in the nation’s service sector, which had been a bulwark against joblessness. Service businesses shed 111,000 jobs in October, their largest one-month loss since Washington began keeping records in 1939.

Many of the losses were directly traceable to the Sept. 11 attacks, which substantially reduced the nation’s appetite for travel. The airline industry laid off 42,000 people, according to government records, and have announced further layoffs of up to 100,000. The transportation services sector, which includes travel agencies, cut 11,000 jobs. Hotels slashed 46,000. Auto services, including car rental agencies, cut 13,000.

Bush used the new job numbers to lobby the Senate for quick passage of a bill designed to revive the economy.

Aware that rising joblessness could galvanize support for Democratic proposals to expand unemployment compensation, the White House called a hastily organized briefing on how administration-favored business tax cuts would offer a better fix.

Economists See Another Fed Cut

Many economists predicted that the Federal Reserve would cut its benchmark interest rate by another half a percentage point when its policymaking body meets Tuesday.

Such a reduction, the 10th this year, would push the “federal funds” rate--the short-term interbank lending rate that is a benchmark for many other interest charges--to a four-decade low of 2%.

The stock market responded coolly to the job numbers. The Dow Jones industrial average rose 59.64 points, or 0.6%, while the technology-heavy Nasdaq composite index fell less than one point.

Analysts at financial institutions including Goldman Sachs Group Inc. and Merrill Lynch & Co. Inc. found the October job figures so dark that they began revising their economic forecasts to show a longer and deeper recession.

“It’s just an ugly report,” Merrill chief economist Bruce Steinberg said. “The economy is hemorrhaging jobs. Unemployment is rising rapidly, and it’s going to keep going up for some time.”

Government statistics issued earlier this week showed the U.S. economy contracted at a 0.4% annual rate in the July-through-September quarter, the first decline since 1993.

Most analysts believe it will shrink even more dramatically during the current October-through-December quarter.

A recession is traditionally defined as two consecutive quarters of decline in the nation’s gross domestic product, the value of all goods and services produced in the nation.

Most analysts had predicted that growth would snap back quickly early next year. But after the turmoil following the September attacks and the unexpectedly large October job losses, many like Steinberg and William Dudley, chief U.S. economist with Goldman Sachs, are pushing back the start of recovery to next spring or summer.

Even when recovery does come, these analysts concede, the unemployment rate may continue to rise as companies maintain lean payrolls until they are certain that growth will continue. “The labor market deterioration is going to turn out to be more persistent than we had thought,” said Dudley.

Blacks, Latinos Hit Hard in Cuts

The October job losses fell especially hard on traditionally disadvantaged groups, according to Labor Department figures.

Black unemployment jumped a full percentage point from 8.7% in September to 9.7% in October. Latino joblessness rose eight-tenths of a point to 7.2%

But, in what some analysts took as an even more telling indicator of the extent of the economy’s troubles, joblessness among married people spiked upward.

The jobless rate for married men rose 0.4% points to 3.1% last month, according to department figures. The rate for married women rose a similar amount to 3.7%.

Although job losses in the travel and tourism industries have captured the most attention, analysts said the employment reductions went well beyond industries immediately affected by the attacks. They suggested that Americans were pulling in their horns and reducing their purchases.

Retail employment dropped by 81,000 during a period when it is usually expanding in preparation for the holiday buying season. Restaurants and bars laid off 42,000.

“One of the most amazing things about the downturn until now has been American consumers, who have kept on buying even when everyone was predicting they’d stop,” said Steinberg. “But they’re giving up the ghost now.”

Although state figures were not available, there were indications that California suffered a substantial fraction of the October losses. Federal statistics for the movie industry--where, according to state figures, employment had already hit a four-year low in September--showed an additional loss of 7,000 jobs in October.

Job Fallout Touches the State

“Given the size of the national [job loss] numbers, I’d fall out of my chair if we didn’t suffer a substantial loss too,” said Ted Gibson, chief economist of the California Department of Finance.

The state’s unemployment rate has already climbed from a 30-year low of 4.5% last February to 5.4% in September.

The half-point jump in the national jobless rate to 5.4% was the largest one-month increase since May 1980, when President Carter was coping with what became the deepest recession of the postwar era.

Although the 5.4% rate is low by historical standards, it is the rapid decay in employment that is prompting such alarm. The new jobless rate is a striking turnaround from the three-decade-low 3.9% that the nation enjoyed in October of last year.