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Heavy job losses in U.S. in one month

— Photo: AFP

Deepening crisis: A father, who was laid off from his job on Friday, files for unemployment benefits in Miami, Florida.

New York: The U.S. economy shed 5,33,000 jobs last month, with the worst employment figures since 1974 underlining the scale of the economic crisis gripping the country.

The shock data for November far exceeded economists’ most pessimistic estimates and sent share prices into a sharp retreat. The unemployment rate is now 6.7 per cent, up from 6.5 per cent in October. It is the highest level since 1993.

Nigel Gault, chief U.S. economist at the forecasting firm IHS Global Insight, said the economy was destined for its worst recession since the Second World War. “These are just absolutely disastrous numbers,” he said.

The figures will increase the expectations weighing on incoming President Barack Obama, who is planning an economic stimulus package when he takes office in January. Some experts have called for an injection of at least $700 billion into the U.S. economy and Mr. Obama has pledged to create 2.5 million jobs over his first two years in office.

Mr. Obama warned on Friday that “there are no quick or easy fixes” to the crisis as he again avoided giving details on how he would jump-start the economy, preferring to outline his programme when he assumes office on January 20. He said: “At the same time, this ... provides us with an opportunity to transform our economy.”

Friday’s announcement brings the jobless total to 10.3 million people out of a workforce of 154.6 million. Economists believe the jobless rate will peak at between 8.7 per cent and 9.8 per cent over the next two years. Ryan Sweet, senior economist at Moody’s economy.com. said: “We are going to see the labour market remain very, very weak throughout the remainder of this year and 2009. It hinges on the monetary and fiscal response.”

The Federal Reserve Bank will consider the latest jobs figures when it discusses interest rates, now at 1 per cent, on December 16. Economists said the U.S central bank could be encouraged to cut rates further amid confirmation on Friday that inflation is a vastly diminished threat.

The jobs data also points to a severe contraction in the world’s largest economy in the final quarter of this year. The U.S. economy tipped into recession in December last year, a panel of experts declared earlier this week.

Wachovia, the Charlotte-based bank, said it now expected the U.S. economy to fall 5 per cent because the downturn, driven by a credit shortage that is reining in consumer spending, has spread across the economy. “Over the last year, the breadth of industries adding jobs has dropped sharply, suggesting broad weakness in consumer spending and dismal consumer confidence,” said John Silvia, chief economist at Wachovia.

Friday’s data showed job cuts in every sector barring healthcare, education and the government.

The service industry suffered the heaviest job losses in November, shedding 3,70,000 posts. Within that total, retailers axed 91,000 jobs and professional and business services, which includes the financial sector, made 1,36,000 people redundant.

The goods-producing industries lost 1,63,000 jobs with 82,000 jobs going in construction and 85,000 in manufacturing. — © Guardian Newspapers Limited, 2008

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