Friday, January 9, 2009
Jobless Rate Surges to 7.2%; Nonfarm Payrolls Drop 524,000
By BRIAN BLACKSTONE WASHINGTON -- The final employment report for 2008 closed the books on a miserable year for U.S. workers with payrolls plunging last month by more than half a million, pushing the unemployment rate to a 16-year high. The economy lost 2.6 million jobs in 2008, government figures showed, the most since World War II ended in 1945. Nearly two million of those losses were in the last four months alone, a sign that the recession accelerated as the financial crisis intensified, and should drag on well into the new year. The figures will likely put pressure on Federal Reserve officials to expand their already aggressive quantitative easing steps in which cash is essentially created and pumped into the economy, and gives backing to those calling for large-scale fiscal stimulus. The dramatic loss of jobs in December is a "stark reminder" of the need for an aggressive economic stimulus package, President-elect Barack Obama said Friday. "This is the moment to act and to act without delay," Mr. Obama told reporters at a press conference. Nonfarm payrolls, which are calculated by a survey of establishments, tumbled 524,000 in December, the U.S. Labor Department said Friday, the 12th-straight decline and in line with the 525,000 drop Wall Street economists in a Dow Jones Newswires survey expected. November was revised to show an even steeper decline of 584,000, the most since 1974. Unemployment Report Making a Case for Stimulus 3:05 The unemployment rate surges to 7.2%, the worst since 1945. WSJ economics reporter Kelly Evans says the U.S. is only a year into the downtown, but is already seeing the results. She tells colleague Phil Izzo how the report is making a case for a massive economic-stimulus package. More Real Time Econ: Comparisons to Past RecessionsEconomics: Worst Since 1945; More Pain to ComeLaid Off: After Eight Months, Landing a JobDiscuss: When will the job market rebound?The pullback was broad-based among manufacturing, construction and most service industries. Companies across a variety of sectors including AT&T Inc., DuPont Co. and Bank of America Corp. all announced job cuts last month. That trend continued into this year with Alcoa Inc., EMC Corp., Walgreen Co. and others already announcing cuts this month. Meanwhile the unemployment rate, which is calculated using a separate survey of households, jumped 0.4 percentage point to 7.2%, the highest since January 1993. Economists think the jobless rate, which was just 5% as recently as April, will hit 8% or higher in coming months. "At this pace, the unemployment rate could well test double digits later this year, and certainly looks well on course to do so during 2010 at the latest," said ING Bank economist Rob Carnell, in a research note. Indeed, according to the minutes of the Fed's December meeting released Tuesday, its staff economists expect the unemployment rate to rise "significantly" into 2010. By some broader measures, labor-market conditions are even worse than the main numbers suggest. When marginally attached and involuntary part-time workers are included, the rate of unemployed or underemployed workers reached 13.5% last month, up almost six percentage points from a year earlier. Job Hunt How To Find a Job in a Bad EconomyDealing With an Unexpected Job LossHow to Refresh a Stale NetworkLayoff Signs: Boss's Cold ShoulderShould You Take an Hourly Job or Stay Unemployed?With the Fed having already lowered official interest rates to near zero last month, officials will have to rely on quantitative easing through the Fed's balance sheet to pump money into the financial system, and officials will likely face more pressure to widen their efforts. Average hourly earnings increased $0.05, or 0.3%, to $18.36. That was up just 3.7% from a year earlier, suggesting the recession is limiting the ability of workers to command higher wages. Friday's numbers, along with weak automobile and retailer sales reports for December, suggest that after contracting just 0.5% at an annual rate in the third quarter, gross domestic product probably plunged 5% or more in the fourth quarter, which would be the steepest decline since the early 1980s. Many economists expect U.S. gross domestic product to contract again this quarter, albeit at a softer pace, and stall or contract next quarter as well. Against that backdrop, expect another 1.5 million job losses at least by the middle of the year, said Harm Bandholz, economist at UniCredit Markets and Investment Banking. Employment Breakdown According to Friday's report, hiring last month in goods-producing industries plunged by just over one-quarter million. Within this group, manufacturing firms cut 149,000 jobs, with motor vehicles and auto parts makers accounting for 21,000 job losses. Construction employment was down by 101,000 last month and has fallen almost 900,000 since peaking in September 2006. Service-sector employment tumbled 273,000. Labor-intensive services make up the vast majority of employment and usually cushion downturns. Yet business and professional services companies shed 113,000 jobs, the second-straight six-figure loss, and financial-sector payrolls were down 14,000. Retail trade cut over 66,000 jobs, reflecting the bleak holiday shopping season. Leisure and hospitality businesses, meanwhile, shed 22,000 jobs as households rein in spending. Temporary employment, which economists consider a leading indicator of future job prospects, fell by more than 80,000. Among the sole bright spots were health care and education, which tend to be more labor intensive and less productive than manufacturing and other services. Employment in those sectors together rose 45,000. The government added 7,000 jobs. The average workweek fell 0.2 hour to 33.3 hours. A separate index of aggregate weekly hours fell 1.2 points to 103.5.