U.S. Job Losses Worst Since 1974 as Downturn Deepens

 
 
By Reuters -  |  Posted 2008-12-05
 
 
 

U.S. Job Losses Worst Since 1974 as Downturn Deepens


WASHINGTON (Reuters)-U.S. employers axed payrolls by 533,000 jobs in November, the most in 34 years and far more than expected, government data on Friday showed, as the year-old recession hammered every corner of the U.S. economy.

U.S. stock markets opened lower, oil prices and the dollar weakened and U.S. government bond prices rallied as the data showed the U.S. downturn was deepening.

"You can't get much uglier than this. The economy has just collapsed, and has gone into a free fall," said Richard Yamarone, chief economist at Argus Research in New York.

The Labor Department said the unemployment rate rose to 6.7 percent last month, the highest since 1993, from 6.5 percent in October. It would have been even higher except for an exodus of Americans who became discouraged in their search for work and left the labor force.

"This is a clear employment blowout. Firms are reacting as dramatically as they can to make sure they have cost structures they can survive the recession," said Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania.

The dismal data sparked calls for aggressive government action to shore up an economy that appears to be facing its deepest downturn since the early 1980s.

"This jobs picture painted today is staggering, and it should be all the evidence Washington needs to act swiftly and decisively to shore up this economy," said Sen. Charles Schumer, a New York Democrat who chairs the congressional Joint Economic Committee.

Broadening economic weakness has already prompted the U.S. Federal Reserve to dramatically lower interest rates to 1 percent and it is expected to trim its benchmark federal funds target toward zero later this month and next, while also exploring other unconventional measures to support growth.

A worldwide credit crisis sparked by mounting defaults on U.S. mortgages has pushed economies around the globe into or toward recession. Canada said earlier on Friday its economy shed 70,600 jobs in November, the most since June 1982.

U.S. Job Losses Steepest Since December 1974


 

U.S. job losses in November were the steepest since December 1974, when 602,000 jobs were shed, and were much worse than the consensus on Wall Street for a 340,000 reduction.

In addition, job losses in recent months turned out to be worse than previously reported. October's loss was revised to show a cut of 320,000, originally given as a 240,000 loss, while September's drop was revised to 403,000 from 284,000.

That meant 199,000 more jobs were lost in September and October than previously thought and the total reduction in U.S. nonfarm payrolls for the last three months was 1.256 million, with almost 2 million shed in the year so far.

"It's just a disaster," said Stephen Stanley, chief U.S. economist at RBS Greenwich in Greenwich, Conn.

Service-providing businesses alone shed 370,000 jobs in November, or two-thirds of the overall job declines, following a loss of 153,000 jobs the month before.

That meant labor market weakness has now shifted over from the goods-producing sectors of the economy to the far more important services sector, which delivers almost 80 percent of U.S. output.

Employment in manufacturing dropped by 85,000, while construction payrolls shrank by 82,000 jobs. Construction employment has declined for 17 straight months, and factory jobs have declined 29 straight months.

The length of the workweek slipped to 33.5 hours, the shortest since records began in 1964, a Labor Department official said. The drop in the workweek could point to further job losses ahead as business cut back sharply on production.

(Written by Alister Bull; editing by Neil Stempleman)

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