U.S. Jobless Rate Soared in January and Payrolls Kept Plunging
By Shobhana Chandra
Feb. 7 (Bloomberg) -- Millions more U.S. workers are likely to lose their jobs after the economy’s freefall sent unemployment in January to the highest level since 1992 and payrolls tumbled, reinforcing the need for an economic stimulus plan.
The jobless rate rose to 7.6 percent from 7.2 percent in December, the Labor Department reported yesterday in Washington. Payrolls fell by 598,000, the biggest monthly drop since December 1974. Losses spanned almost all industries, from construction and manufacturing to retailing, trucking, media and finance.
“The scary thing is there is really no end in sight to the soaring jobless rate,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “It’s difficult to see what’s going to turn the situation around. This is the sort of catalyst that could get Congress to move” to agreeing on a compromise plan.
President Barack Obama, who predicted a “dismal” report, is pushing for a stimulus plan to revive the economy and create jobs, and is expected to announce a new effort to shore up credit markets. The rate of the job market’s decline means it’s unlikely government efforts will halt a collapse in consumer spending until the second half of the year, economists said.
“We’ll see households pull way back,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts. “We’ll probably see job losses of another 2 million to 3 million before this is over.” Payrolls have already plunged by 3.57 million so far.
U.S. Treasuries slipped yesterday while stocks rose, indicating some investors had feared an even worse January employment report. The Standard & Poor’s 500 Stock Index gained 2.7 percent to close at 868.6 in New York. Benchmark 10-year note yields rose to 2.99 percent at 5:12 p.m. yesterday in New York from 2.91 percent on the prior day’s close.
The loss of jobs, at employers ranging from manufacturers like Caterpillar Inc. to retailers such as Macy’s Inc., is shattering consumer confidence and crippling spending. Household purchases fell more than 3 percent at an annual rate in the past two quarters, the first time that’s happened since at least 1947.
With revised declines of 577,000 for December and 597,000 for November, revisions subtracted 66,000 workers from previously reported figures for the last two months of 2008. The 3.57 million jobs lost since the recession started in December 2007 marks the biggest employment slump of any economic contraction in the postwar period.
Last month’s losses also cap the first time since records began in 1939 that job cuts exceeded half a million in three consecutive months.
More Than Anticipated
Payrolls were forecast to drop 540,000, according to the median estimate of 75 economists surveyed by Bloomberg News. The jobless rate was projected to jump to 7.5 percent.
The House of Representatives last week passed an $819 billion stimulus package that includes tax cuts, spending on schools, roads and other infrastructure, and aid to states.
Christina Romer, chairman of Obama’s Council of Economic Advisers, said yesterday “the unemployment rate could reach double digits” without a stimulus, in a statement after the jobs report.
Obama yesterday said the nation faces “an urgent and growing crisis.”
Yesterday’s report showed factory payrolls fell by 207,000, the biggest drop since October 1982, after declining 162,000 in December. Economists had forecast a January drop of 145,000. The decrease included a loss of 31,300 jobs in auto manufacturing and parts industries.
Caterpillar, the world’s largest maker of construction equipment, on Jan. 30 said it will cut 2,110 workers in addition to the 20,000 reductions it reported earlier in the month.
The decline in U.S. Steel Corp.’s headcount in recent months “is the biggest change as a result of business conditions” since a series of plant closings from 1981 to 1992, spokesman John Armstrong said. In that period, the company’s workforce fell to 21,000 from 171,000, he said.
Payrolls at builders fell 111,000 after decreasing 86,000.
Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 279,000 workers after cutting 327,000. Retail payrolls decreased by 45,100 after a decline of 82,700. Financial firms reduced payrolls by 42,000, after a 27,000 decrease the prior month.
Government payrolls increased by 6,000 after shrinking by 10,000 the prior month.
Saks Inc., Target Corp., Starbucks Corp. and Home Depot Inc. last month reported plans to reduce workers. Others following suit in February include Macy’s. The second-largest U.S. department-store company said it will cut 7,000 jobs, eliminate executives’ merit increases for 2008, and trim its contribution to staff 401(k) retirement-savings plans.
“This is a time when nothing should be considered a sacred cow,” Macy’s Chief Executive Officer Terry Lundgren said on a conference call with investors and analysts.
News of job losses continued this week. PNC Financial Services Group Inc. will reduce almost 10 percent of its workforce by 2011, and Estee Lauder Cos., the maker of Clinique and Bobbi Brown cosmetics, will slash 2,000 jobs over the next two years.
Government jobs are now also in jeopardy. The U.S. Postal Service said it plans to trim headcount through attrition and early retirement, and has asked lawmakers to allow it to reduce its six-days-a-week delivery schedule to pare expenses.
The average work week remained at 33.3 hours in January. Average weekly hours worked by production workers fell to 39.8 hours from 39.9 hours, while overtime decreased to 2.9 hours from 3 hours. Average weekly earnings rose by $1.67 to $614.72.
Workers’ average hourly wages rose 5 cents, or 0.3 percent, to $18.46 from the prior month. Hourly earnings were 3.9 percent higher than in January 2008. Economists surveyed by Bloomberg had forecast a 0.2 percent increase from December and a 3.6 percent gain for the 12-month period.
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