NYT: Unemployment Rate at 14-Year High After Big October Losses
The American economy lost another 240,000 jobs in October, the government reported Friday morning, the 10th consecutive monthly decline and a clear signal that an accelerating slowdown is assailing households and businesses.
The unemployment rate climbed to 6.5 percent , the highest level since 1994 and up from 6.1 percent the month before.
Adding to the gloom was a steep downward revision in payroll numbers for September. The Labor Department said that employers slashed 284,000 jobs that month, far higher than the 159,000 that was initially reported.
The latest sign of distress seemed certain to inject more urgency into the debate over another round of government stimulus to spur spending, and is more evidence that President-elect Barack Obama will inherit a deeply troubled economy.
Mr. Obama has in recent months called for another package of so-called stimulus spending initiatives. Democratic leaders in the House suggested this week that they might seek swift passage of $60 billion worth of measures that would extend unemployment benefits and food stamps, while aiding states whose tax revenues have plummeted. They would then pursue a broader package that could reach $200 billion in spending once Mr. Obama takes office.
The Bush administration has criticized Democratic proposals for immediate aid, raising the specter of a veto.
Above all, the latest monthly snapshot of the jobs market reinforced how the economy remains gripped by a potent combination of troubles — plunging housing prices, tight credit and shrinking paychecks — with all three operating at once in a downward spiral.
Companies have been hiring tepidly and laying off workers throughout the year as business has slowed, while cutting working hours for those on the payroll. Millions of Americans accustomed to borrowing against homes to finance spending have lost that artery of cash as home prices have fallen.
Wages have effectively shrunk for most workers, as rising costs for food and fuel have more than absorbed meager increases in pay. That has further crimped American proclivities to spend.
In October, weekly wages for rank-and-file workers — those not in supervisory or managerial positions — grew just 2.9 percent since October 2007, well below the rate of inflation.
Banks reeling from multibillion-dollar losses stemming from bad bets on mortgages have tightened lending, depriving businesses and households of credit and amplifying their newfound austerity.
All of this has cut into spending power. Consumer spending dropped between July and September — the first quarterly decline in 17 years — further eroding the motivation for businesses to hire.
Friday’s report offered signs that the pressures on workers are rapidly intensifying. Between January and August, the economy lost about 75,000 jobs a month, according to preliminary numbers from the Bureau of Labor Statistics. The pace has more than doubled since then.
Many economists now expect the unemployment rate to reach 8 percent by the middle of next year, a level not seen in 25 years. Most forecasts envision the economy shrinking well into the next year and perhaps until 2010.
Recent days have offered fresh indications of trouble. The annual pace of auto sales fell off sharply in October, down 15 percent compared to September, according to analysis from Goldman Sachs.
The widely watched Institute for Supply Management survey fell in October to depths last seen 26 years ago, reflecting shrinking industrial activity and suggesting weakening demand for goods as the economy slows.
That weakness has gone global, as many other major economies also succumb to slowdown — from Spain and Britain to Japan and Brazil — and as financial crisis now snuffs out economic activity in much of the world.
At the same time, banks continued to tighten their purse strings in October, according to a survey of senior loan officers conducted by the Federal Reserve. Economists construed the survey as an indication that even healthy companies and many households were having difficulty securing capital, further braking the economy and making prospects more difficult for American workers.
Many economists expect this picture to worsen as the consequences of the global financial crisis ripple out to businesses and households. Though the $700 billion taxpayer-financed bailout has staved off fears of an imminent collapse and restored some order to the financial system, it has not persuaded banks to lend freely. Credit remains tight for businesses and homeowners.
