WASHINGTON (Reuters) - U.S. employers slashed 598,000 jobs in January, the biggest monthly loss in 34 years, and the jobless rate soared to a 16-year peak, putting pressure on lawmakers to act quickly to counter a deepening recession.
“The economy is just falling into oblivion and it will get worse,” said Greg Salvaggio, vice president for trading at Tempus Consulting in Washington.
The latest bad economic news, contained in a report from the Labor Department on Friday, came as the Senate was aiming for a night-time vote on a package of measures to spur the economy that could cost $780 billion or more.
President Barack Obama said it was “inexcusable and irresponsible for any of us to get bogged down in distraction and delay or politics as usual while millions of Americans are being put out of work.” But Republican leaders sought to trim back the package for fear of driving up U.S. budget deficits.
Last month’s job cuts were the most severe since December 1974, while the unemployment rate hit 7.6 percent, its highest level since September 1992. The jobless rate, which stood at a low 4.9 percent a year ago, has jumped a full percentage point over just the last three months.
A separate report from the Federal Reserve showed consumers reduced credit use for a third straight month in December, a sign of spending caution as jobs disappear.
Consumer credit use contracted by $6.6 billion in December after falling $11.04 billion in November, the largest monthly drop since records were started in 1943.
“Today’s grim job numbers underscore the human toll of our economic crisis and add to the overwhelming evidence for getting a recovery package to the president’s desk fast,” said the chairman of the congressional Joint Economic Committee, Democratic Rep. Carolyn Maloney of New York.
Many private-sector analysts agreed on the need for some action to try to slow the relentless slide in job prospects.
“These are huge, huge declines,” said Nigel Gault, director of U.S. economic research for Global Insight in Lexington, Massachusetts. “Hopefully it will concentrate some minds in the Senate so they can come to an agreement” on a stimulus plan.
Wall Street stocks chalked up gains for a second straight day on investors hopes that lawmakers will be jolted into action to help the economy. The blue-chip Dow Jones industrial average closed up 2.7 percent.
Prices for U.S. government debt sank, however, on worry a wave of borrowing will be needed to fund new spending.
Economist Joel Naroff of Naroff Economic Advisors in Holland, Pennsylvania, said conditions were clearly worsening and will do so until confidence improves.
“Firms have decided that survival is job one and if that means slashing workers, so be it,” he said.
U.S. Commissioner of Labor Statistics Keith Hall emphasized the degree the deterioration in labor markets has gathered steam as a U.S. recession wears on.
“January’s sharp drop in employment brings job losses to 3.6 million since the start of the recession in December 2007,” Hall said in a statement. “About half the decline occurred in the last three months.”
It was the most severe consecutive string of job losses since World War Two.
The U.S. manufacturing sector bled jobs in January at the sharpest rate in more than 26 years, shedding 207,000 workers after a loss of 162,000 in December. The last time more factory jobs were lost in a single month was October 1982.
An index measuring total paid hours for factory workers dropped to its lowest level since 1940.
Construction industries dropped 111,000 jobs in January after 86,000 in December and Hall said that pace of cuts was accelerating. Retail businesses cut another 45,000 positions after shedding 82,700 in December.
There were 121,000 job losses among professional and business services providers in January on top of 106,000 that were eliminated in December. Only education and health services added jobs as did the government.
Analysts said there was no sign of relief on the horizon, judging from the depth and breadth of January’s labor market plunge.
“It is just another confirmation that we’re are in a deep and long recession, and the bottom is not even in sight,” said Robert MacIntosh, chief economist for Eaton Vance Management in Boston. “It’s going to be a long haul.”