Steve Wevodau

U.S. Jobs Hemorrhage In ‘08 - Steven Wevodau

Maurna Desmond, 01.09.09, 10:35 AM ET

 

 

 

Major indexes slid Friday morning after the U.S. Labor Department reported that the national unemployment rate had jumped to a higher than expected 7.2% during the month of December and an additional 524,000 nonfarm jobs had been shed, leaving more than 10 million Americans out of work. Economists had expected a loss of 500,000 jobs, with an unemployment rate of 7.0%.

Further evidence of weakening in the labor market reinforces concerns that the American economy may be heading into a deeper and more prolonged recession than previously expected. It also increases pressure on the incoming administration to quickly forge a comprehensive stimulus program to stem the bleeding.

With Wall Street’s fears confirmed, the Dow Jones industrial average fell 88 points, or 1.0%, to 8,654. The S&P 500 lost 14 points, or 1.6%, to 895, and the Nasdaq slipped 32 points, or 2.0%, to 1,584. Investors fled instead to safe-haven government debt, pulling down the yield on the benchmark 10-year Treasury note to 2.48%, from 2.45% just before the report and 2.44% late Thursday.

Joel Naroff of Naroff Economic Advisors said the government data indicated that the labor situation is rapidly deteriorating. “Firms are getting their cost structures in place, especially labors costs, in order to ride out the recession,” he said. “They’re not waiting. They’re cutting workers away, and we’re seeing an incredibly rapid adjustment to the economic situation.”

In the four months since Wall Street’s Black September, when markets were sent into a tailspin by the collapse of storied investment bank Lehman Brothers Holdings and the government take-under of insurance giant American International Group,, payroll employment fell by 1.9 million, or 1.4%. Since the start of the U.S. recession in December 2007, the number of unemployed persons has increased by 3.6 million, and the unemployment rate has surged by 2.3 percentage points.

“Basically, since December 2007 we’ve lost 2.6 million jobs [long-term unemployed] with no end of sight,” said Peter Morici, a professor at the University of Maryland. “A stimulus package will stabilize the situation, but until we fix the banks and the trade deficit, there won’t be any recovery.”

Compounding the sobering report was the upward revision of November nonfarm payroll losses to 584,000, from 533,000, and October’s figure was also revised upward, to 423,000 jobs lost, from 320,000.

Firms of all sizes have been cutting jobs in the United States due to dwindling demand for their goods and services from within and without as the troubles that began in the American mortgage market have proved to be a worldwide contagion. (See the Forbes Layoff Tracker.)

Earlier in the week, payroll processor Automatic Data Processing reported that the U.S. private sector shed a much higher than expected 693,000 nonfarm jobs in December. Earlier in the week, the Fed issued minutes from its Dec. 16 monetary policy meeting predicting negative GDP growth in 2009, with accelerating unemployment into 2010. (See “Fed Negative On 2009; Street Resilient.”)

–Reuters contributed to this article.

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