By Shobhana Chandra
Jan. 9 (Bloomberg) -- The U.S. lost more jobs in 2008 than
in any year since 1945 as employers fired another 524,000 people
in December, indicating a free-fall in the economy just days
before President-elect Barack Obama takes office.
“Consumers are now going to get more and more scared at the
prospect of losing their job,” said Nariman Behravesh, chief
economist at IHS Global Insight in Lexington, Massachusetts.
Obama’s proposed fiscal stimulus “needs to be big, needs to be
bold, needs to be swift. If they can do something quickly we can
limit the hemorrhage by mid-year.”
The Labor Department reported that the nation lost 2.589
million jobs in 2008, just shy of the 2.75 million decline at the
end of World War II. The unemployment rate climbed more than
economists forecast, to 7.2 percent in December, the highest
level in almost 16 years.
Today’s figures will intensify pressure on U.S. lawmakers to
act quickly on Obama’s recovery program, which may exceed $775
billion and aims to save or create 3 million jobs. They also
underscore the urgency of the Federal Reserve’s $200 billion
initiative to restart consumer financing markets that’s scheduled
to begin next month.
The outlook for jobs this year is no brighter as retailers
from Wal-Mart Stores Inc. to Macy's Inc. slash profit forecasts
and manufacturers including Alcoa Inc. cut output and staff.
Stocks, Treasuries
Stock-index futures rose initially, before equities fell in
regular trading. Treasuries were little changed, while the dollar
rose on relief among some investors that the payroll drop wasn’t
bigger. The Standard & Poor’s 500 Stock Index fell 1.6 percent to
894.86 at 10:23 a.m. in New York. Benchmark 10-year note yields
were at 2.43 percent. The dollar rose 1 percent to $1.3568 per
euro.
Payrolls were forecast to drop 525,000 after a previously
reported 533,000 decline in November, according to the median
estimate of 73 economists surveyed by Bloomberg News. Revisions
subtracted 154,000 from payroll figures previously reported for
November and October.
The jobless rate was projected to jump to 7 percent from a
previously reported 6.7 percent in November.
Losses last month were widespread, with manufacturers,
builders, retailers and temporary-help agencies axing positions.
Companies are also cutting back employees’ working hours in
an effort to limit labor costs. The average work week shrank to a
record-low 33.3 hours, today’s figures showed.
‘Full Throttle’
“This was the most rapid deterioration in the labor market
over a six-month period since 1975,” said Michael Darda, chief
economist at MKM Partners LP in Greenwich, Connecticut. “Policy
makers will go full throttle” until “the labor market starts to
turn,” he said.
Obama is pressing for a stimulus plan including tax cuts and
spending on everything from roads and schools to the energy
network. Yesterday he called for “dramatic action as soon as
possible” to help pull the world’s largest economy out of a
slump that’s in its second year. “If nothing is done, this
recession could linger for years,” he said in Fairfax, Virginia.
Fed policy makers are planning to start a new program next
month aimed at shoring up the market for financing car purchases,
credit card loans and student debt. Officials announced the
effort in November at the same time as initiating a $600 billion
program to purchase debt issued or backed by government-chartered
housing finance companies.
Fed’s Response
The central bank has already lowered its benchmark interest
rate to zero to 0.25 percent, aiming to bring down borrowing
costs. Officials’ main focus is now taking unorthodox steps
termed by analysts as quantitative easing to boost the supply of
credit in the economy.
“For policy makers, there is a message” in today’s
figures, said Kurt Karl, chief U.S. economist at Swiss Re in New
York. “It obviously gives a big boost to Obama’s quite large
stimulus package. The Fed will continue to do quantitative easing
with rates so low.”
Obama’s economic aides and lawmakers are also discussing
ways to deploy the second half of the Treasury’s $700 billion
financial-rescue fund. House Financial Services Committee
Chairman Barney Frank favors using some funds to stem mortgage
foreclosures, aid issuers of municipal bonds and help homebuyers.
With today’s report, the Labor Department revised figures
from its household survey, which includes the unemployment rate,
going back five years. Benchmark revisions to the payroll figures
will be announced in February.
12th Decline
Last month’s decline was the 12th consecutive drop in
payrolls. The economy created 1.1 million jobs in 2007.
During President George W. Bush's two terms in office, the
economy generated a net 3 million jobs, compared with 22.8
million created during the eight years when Bill Clinton was
president.
Bush leaves office with unemployment at 7.2 percent,
compared with the 4.2 percent rate he inherited from Clinton in
January 2001. Unemployment was 7.3 percent when Clinton took
office in January 1993, the last month that the jobless rate was
higher than now.
Workers’ average hourly wages rose 5 cents, or 0.3 percent,
to $18.36 from the prior month. Hourly earnings were 3.7 percent
higher than December 2007. Economists surveyed by Bloomberg had
forecast a 0.2 percent increase from November and a 3.6 percent
gain for the 12-month period.
Today’s report showed factory payrolls shrank 149,000, the
biggest drop since August 2001. Economists had forecast a drop of
100,000. The decrease included a loss of 21,400 jobs in auto and
parts industries. Manufacturing, which makes up 12 percent of the
economy, shrank in December at the fastest pace in 28 years,
Institute for Supply Management figures showed.