Jobless rate at 14-year high as losses continue
WASHINGTON (Reuters) - The unemployment rate shot to a 14-1/2 year high last month as employers slashed jobs by an unexpectedly steep 240,000, suggesting President-elect Barack Obama will face a deep recession when he takes office.
The Labor Department said on Friday the jobless rate rose a steep four-tenths of a percent to 6.5 percent in October, the highest since March 1994, and that job losses in September and August were deeper than previously thought.
So far this year 1.2 million U.S. jobs have been lost, with 651,000 in the past three months alone as the slide in the national labor market picked up in intensity.
"We have entered the phase of serious recession conditions. Unfortunately we will encounter more of this," said Richard DeKaser, chief economist for National City Corp in Cleveland.
Goldman Sachs economist Jan Hatzius said the data implied the U.S. economy was sinking into a deep recession in which the jobless rate could climb to 8.5 percent by the end of 2009.
While the data was bleak, it was not as grim as some had feared. While the dollar fell, U.S. stocks rose after two days of sharp losses and prices of U.S. Treasuries turned lower.
KICKING THE ECONOMY
About 284,000 jobs were shed in September, the most since November 2001, shortly after the September 11 attacks on the United States, and 127,000 were lost in August. In all, 179,000 more jobs were cut in August and September than previously thought.
Michael Feroli, an economist with JPMorgan Chase, said the surprising weakness in August and September suggests the economy headed into recession even before the worst of the credit crisis hit.
"Whereas it had been thought the financial crisis pushed a teetering economy over the edge, it now looks like that crisis kicked an economy that was already down," Feroli said.
Fear about job security has led U.S. consumers to cut spending, and that has reverberated around the globe, with China and other low-cost goods producers feeling the impact of slacker American demand.
On Capitol Hill, Democratic Sen. Charles Schumer of New York described the job numbers as "shocking" and said they call for "a strong, deep and effective stimulus package."
General Motors Corp, which along with other domestic carmakers is pleading for government help, said it had a $4.2 billion operating loss in the third quarter.
In a telephone interview, Commerce Secretary Carlos Gutierrez said the economy "will go through several difficult months," but by the time Obama takes office in January a Treasury plan to buy bad assets from banks should be working. He predicted that will ease some economic pressures.
The Bush administration is "willing to listen to ideas (on stimulus) but most of what we've heard called stimulus doesn't meet our definition of stimulus," Gutierrez said. Continued...
