BLBG: U.S. Job Losses Probably Reached 26-Year High as Economy Sank
By Bob Willis
Dec. 5 (Bloomberg) -- U.S. employers probably cut jobs in November at the fastest pace in a quarter century as the yearlong recession engulfing the world’s largest economy deepened, economists said before a report today.
Payrolls shrank by 333,000 workers last month, the biggest drop since July 1982, according to the median estimate in a Bloomberg News survey. The jobless rate may have jumped to 6.8 percent, the highest level since 1993.
Job losses are likely to keep cascading into next year as the collapse in credit and slump in spending hurt companies from General Motors Corp. to Citigroup Inc. and AT&T Inc. President- elect Barack Obama, confronting what he called a “crisis of historic proportions,” announced a plan last week to save or create 2.5 million jobs in two years.
“The pace of contraction has really picked up,” said Julia Coronado, a senior economist at Barclays Capital Inc. in New York. The labor market “is in a severe deterioration phase. Job cuts are across the board.”
The Labor Department’s report is due at 8:30 a.m. in Washington. Payroll estimates of the 73 economists surveyed ranged from losses of 220,000 to 470,000. The jobless rate last month probably rose from 6.5 percent in October.
The 11th consecutive drop in payrolls would follow a 240,000 decline in October and bring the number of jobs eliminated so far this year to more than 1.5 million. Factories probably accounted for about a third of the decline in jobs last month, according to the survey median.
Jobs, Recession
The employment slump was a key factor in determining the start of the recession. The National Bureau of Economic Research, the arbiter of U.S. business cycles, announced this week that a contraction began in December 2007, the month payrolls peaked.
At 12 months, the recession is already the longest since the 16-month slump that ended in November 1982.
Other reports have indicated the labor market is deteriorating. The Institute for Supply Management’s gauge of employment at service industries dropped last month to the lowest level since records began in 1997. Its index for manufacturing jobs fell to a 17-year low.
The declines prompted John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina, to raise his forecast for the November payroll loss to 450,000.
First-time jobless claims, a government measure of firings, have held over half a million in each of the last four weeks, the longest stretch since 1982.
More Pessimism
As economic data for last month deteriorated, economists at Goldman Group Inc. were among those marking down estimates for gross domestic product and boosting forecasts for unemployment. The economy will shrink at a 5 percent annual rate this quarter and decline at a 3 percent pace in the first three months of 2009, Goldman’s chief U.S. economist Jan Hatzius said in a note.
Goldman forecasts the jobless rate will climb to 9 percent by late 2009.
The employment report, the second issued since Obama was elected president on Nov. 4, is likely to add to pressures on policy makers to craft additional stimulus measures. Obama named a team that includes New York Federal Reserve Bank President Timothy Geithner as Treasury Secretary-designate and former Fed Chairman Paul Volcker as head of a new White House panel aimed at reviving the economy.
“It’s time to not just address the immediate economic threats but to start laying the groundwork for long-term prosperity,” Obama, 47, said Dec. 3 as he announced former energy secretary Bill Richardson as his nominee for Commerce Secretary. “The most significant issue that we are facing right now is how do we put people back to work.”
Auto Slump
U.S. automakers have been particularly hard hit as sales last month dropped to the lowest level in 26 years. The top executives of General Motors, Ford Motor Co. and Chrysler LLC this week appealed to Congress for as much as $34 billion in government assistance.
The Ann Arbor, Michigan-based Center for Automotive Research projects that a collapse of GM would lead to job losses totaling 2.5 million, including 1.4 million people in industries not directly tied to manufacturing. Chrysler yesterday announced it had cut 5,000 jobs last week.
Service companies are also slashing staff. AT&T, the largest U.S. phone company, will cut 12,000 jobs, striving to trim expenses as the U.S. economy falters, the Dallas-based company said in a statement yesterday. Citigroup said last month is plans to eliminate 52,000 jobs worldwide.
