First Posted 10:17:00 12/06/2008
WASHINGTON — A stunning retrenchment cut 533,000 jobs from US payrolls in November, sending the unemployment rate to a 15-year high, according to official data Friday that suggested a deeper recession than feared.
The Labor Department’s November report on nonfarm payrolls, seen as one of the best indicators of economic momentum, highlighted severe cutbacks by employers in the face of a struggling economy and tight credit conditions.
The jobless rate, based on a separate survey of households, rose to 6.7 percent, the highest since October 1993 but slightly better than the consensus estimate of economists of 6.8 percent. That survey showed 2.7 million people have joined the jobless ranks since the recession began.
The number of job losses was the sharpest in 34 years and much higher than the 325,000 expected by private forecasters.
“Just when you thought that the US economic outlook couldn’t get any uglier, it goes ahead and does,” said Meny Grauman, economist at CIBC World Markets.
“The running tally of payroll declines that the US economy is now racking up is pushing up the odds that this downturn is even deeper than many had contemplated.”
Ian Shepherdson, chief US economist at High Frequency Economics, called the report “almost indescribably terrible.”
“In the past six months the US has lost 1.55 million jobs, almost as many as were lost in the whole 2001 recession, which included 9/11 and the two months after,” he said. “The pace of job losses is accelerating alarmingly.”
The Labor Department also made a sharp upward revision in the number of job losses in the prior two months: October saw a loss of 403,000 jobs (up from an earlier estimate of 240,00) and September job losses were revised up to 320,000 from 284,000.
“There is no sugar-coating this data,” said Patrick O’Hare at Briefing.com. “It is bad news that will weigh heavily on consumer sentiment and will serve to increase concerns about the depth and length of the current slowdown.”
The Labor Department noted that since the official onset of recession in December 2007, some 2.7 million jobs have been lost, and the unemployment rate has climbed by 1.7 percentage points.
John Ryding at RDQ Economics called the release “a shockingly weak report that suggests the fourth quarter could see a drop in real GDP (gross domestic product) of 5.0 percent or more at an annual rate.”
Ryding said the figures will likely elicit a swift response from the government and Federal Reserve, which has already cut its base lending rate to a historic low of 1.0 percent.
“These data will spur the calls for a massive stimulus plan, increase the chances of a rescue package for the domestic auto industry, and add to the case that the Fed cuts the fed funds target rate by another 50 basis points in December,” he said.
A separate report by the Federal Reserve showed US consumer credit fell 1.6 percent in October, highlighting the caution among consumers.
The White House said Friday it was “very concerned” about unemployment and vowed to pursue “aggressive” remedies.
President-elect Barack Obama called for “urgent” measures to put people back to work and to stimulate the US economy after the release.
In November, the report showed a loss of 85,000 jobs in manufacturing, bringing the total in the sector to 604,000 over the past 12 months, despite a return of 27,000 aerospace workers from strike.
The services sector, which represents more than 80 percent of US jobs, lost 370,000 jobs last month.
Employment in the retail sector fell by 91,000, and the leisure and hospitality sector shed 76,000 jobs.
The troubled financial sector shed 32,000 jobs in month, bringing the 12-month total losses to 142,000.
The National Bureau of Economic Research, a panel recognized as the official arbiter of business cycles, said this week the US entered recession in December 2007.
Although a recession is generally defined as two consecutive quarters of declining activity, the panel has its own criteria for determining a downturn, including data on employment, income and industrial output.(PDI)