Unemployment rate expected to match peak reached after 2001 recession
WASHINGTON (MarketWatch) -- Financial markets, investors and economists are preparing for the worst employment report in five years to be released by the Labor Department on Friday.
The median forecast by economists surveyed by MarketWatch was for a loss of 210,000 nonfarm payroll jobs in October, the most since March 2003. According to a survey of work sites, payrolls have already declined for nine straight months for a total of 760,000 fewer jobs.
The report will be released to the public at 8:30 a.m. EST.
The unemployment rate, which is determined by a separate survey of households, is expected to rise to 6.3% in October from 6.1% in September. It was at 5% just six months ago. The unemployment rate peaked at 6.3% after the 2001 recession, but most economists expect the unemployment rate to rise to near 8% this time.
There's been little good news on the jobs market for months, and most indicators point to worsening conditions.
The credit crunch that hit in mid-September has been devastating for manufacturing firms that sell on credit. Auto sales, for instance, fell to the lowest levels in 25 years in October. On per-capita basis, auto sales were the lowest since World War II. See full story.
Chain-store sales, which don't depend so much on new loans as on old credit lines, have held up better than the autos have, but most stores are reporting very weak demand for everything except the essentials. See full story.
Some economists are looking for a very sharp decline in payrolls for October. Seamus Smyth of Goldman Sachs, for instance, is forecasting a loss of 300,000 jobs, which would be the one of the worst months in the past 20 years.
Why do folk think it'll be so rotten?
On Thursday, the Labor Department said the level of continuing jobless claims -- the number of people collecting unemployment benefits -- rose to a 25-year high of 3.84 million, a sign that it's hard to find a job after being laid off. Applications for jobless claims are also at lofty levels. See full story.
Fewer companies told the Institute for Supply Management that they are hiring.
Fewer companies are advertising job openings in newspapers or online.
More consumers told the Conference Board that they think jobs are hard to find. In fact, the spread between the number who say jobs are hard to find and the number who say jobs are plentiful widened sharply in October to the widest point in more than a decade.
The ADP employment index fell by 157,000 private-sector jobs in October, more than twice as many as in any other month during this downturn.
Other economists expect job losses of around 175,000. It's not that they are bullish on the economy; it's more that they believe September's reported loss of 159,000 reflected some one-time factors that won't be repeated in October.
"We view a negative-175,000 outcome in October as representing a significant degree of deterioration relative to a comparable baseline of approximately negative-120,000 in September," wrote David Greenlaw, an economist for Morgan Stanley.
