U.S. job losses worst since 1974 as downturn deepens
WASHINGTON (Reuters) - U.S. employers axed 533,000 jobs from payrolls in November, the most in 34 years, as the year-old recession hammered the economy and hardened calls for dramatic government action to restore growth.
The Labor Department said Friday the unemployment rate hit 6.7 percent last month, the highest since 1993, which adds up to 10.3 million Americans out of work, 2 million more than the population of New York City.
The jobless rate, which stood at 6.5 percent in October, would have been even higher but for people leaving the labor force in discouragement over their search for work.
A number of U.S. companies have announced jobs cuts this week, including General Motors Corp and asset manager Legg Mason Inc Friday, a day after phone giant AT&T said it was letting 12,000 workers go. Economists expect the unemployment rate to top 8 percent by late next year.
"You can't get much uglier than this. The economy has just collapsed, and has gone into a free fall," said Richard Yamarone, chief economist at Argus Research in New York.
The collapse of the U.S. housing market last year sparked a global credit crisis that has killed growth, panicked investors and destroyed some of the oldest names in banking.
The U.S. government has pledged $700 billion of taxpayer money to shore up the financial sector and President-elect Barack Obama has vowed a powerful fiscal stimulus, with more aggressive action from the Federal Reserve also expected.
The U.S. central bank has cut interest rates to 1 percent and is expected to lower them toward zero in the coming weeks. It is also deploying unconventional measures to buy government debt and lend directly to companies to stimulate activity.
Obama, who takes office on January 20, said the downturn demanded action to create new jobs, which economists say means a spending and tax plan of $500 billion to $700 billion.
"There are no quick or easy fixes to this crisis, which has been many years in the making, and it's likely to get worse before it gets better," Obama warned.
John Hendon, 36, lost his job with Mutual Savings Credit Union in Birmingham, Alabama, in November. He said it had been difficult, not least because he has three children.
"I am going on interviews and waiting on responses. However, they are telling me due to the economy, they are weighing in on their budget for next year. It's a bad time of year to be out of work and there are so many people looking," said Hendon, whose old job paid over $50,000 a year.
U.S. stock markets staged a late rally after sagging for most of the day, with the Dow Jones industrial average closing 259 points or 3.09 percent higher at 8,635. Oil priced retreated below $42 per barrel and markets in Europe and Latin America fell.
The worldwide credit crisis sparked by mounting defaults on U.S. mortgages has pushed economies around the globe into or toward recession. Canada said earlier Friday its economy shed 70,600 jobs in November, the most since June 1982.
U.S. mortgage foreclosure levels hit a record in the third quarter, said the Mortgage Bankers Association, which estimates that 2.2 million home mortgages will start the foreclosure process this year before government efforts to stem the tide can gain traction.
Separate data from the Federal Reserve showed U.S. consumer borrowing fell $3.54 billion in October as the escalating credit crisis pinched lending after the collapse of investment bank Lehman Brothers. October consumer credit fell at an annual rate of 1.5 percent to a total $2.578 trillion, the Fed said. Analysts had expected it to grow $2 billion in October.
Job losses in November were the steepest since December 1974, when 602,000 jobs were shed, and much worse than the consensus on Wall Street for a 340,000 reduction.
In addition, job losses in recent months turned out to be worse than previously reported. October's loss was revised to 320,000, originally given as a 240,000 loss, while September's drop was revised to 403,000 from 284,000.
That meant 199,000 more jobs were lost in September and October than initially thought and the total reduction in U.S. nonfarm payrolls for the last three months was 1.256 million, with almost 2 million jobs shed in the year so far.
If December's job picture mirrored the last three months, it would make 2008 the worst for employment since 1945.
Service-providing businesses alone shed 370,000 jobs in November, or two-thirds of the overall job declines, following a loss of 153,000 jobs the previous month.
That meant labor market weakness has shifted over from the goods-producing sectors of the economy to the far more important services sector, which delivers almost 80 percent of U.S. output.
Employment in manufacturing dropped by 85,000, while construction payrolls shrank by 82,000 jobs. Construction employment has declined for 17 straight months, and factory jobs have declined 29 straight months.
"It's just a disaster," said Stephen Stanley, chief U.S. economist at RBS Greenwich in Greenwich, Conn.