Job Losses Are Worst in Two Decades
WASHINGTON (Reuters) - The United States shed a staggering 415,000 jobs in October, the most in two decades, as the full impact of the Sept. 11 attacks ripped into an economy already in the early stages of recession, a government report on Friday showed.
The Labor Department said the job losses last month were the worst since 464,000 were axed in May 1980, and came on top of 213,000 lost in September.
The unemployment rate shot up half a percentage point to 5.4 percent in October from 4.9 percent in September -- the highest in nearly five years since a matching 5.4 percent rate in December 1996.
Analysts were hard-pressed to find bright spots in the report as virtually every sector of the economy lost jobs.
Many businesses shut down for a few days after hijackers slammed airplanes into the World Trade Center and the Pentagon and shoppers abandoned malls. Some industries like airlines and tourism are still trying to crawl back to normal operation amid heightened economic uncertainty and consumer anxiety.
"We clearly are now in the throes of nasty recession," said economist Bill Cheney of John Hancock Financial Services Inc. in Boston. "Nothing dampens consumer confidence and spending like job losses, even if you aren't the one losing your job."
President Bush said shortly after the data came out that there was rising urgency for lawmakers to approve broadbased measures to boost activity. A package is currently working its way through Congress but progress has been slow amid partisan bickering.
"We need to work together to prevent further loss of jobs by passing an economic stimulus package that in fact will cause the job base to firm up and expand," Bush said.
The worse-than-expected report raised concerns that a more severe downturn may lie ahead and boosted chances for another sharp interest rate cut by the Federal Reserve next week.
"The recession is getting deeper and will extend well into 2002," said economist Sung Won Sohn of Wells Fargo Bank in Minneapolis, but he added there could be a strong rebound in the second half next year because of fresh stimulus spending, reduced tax rates and sharply lower inventories.
"But meantime, government policymakers must put out the immediate fire in front of us in the form of a rising jobless rate and plunging confidence," Sohn said, "That's why the Fed has to cut interest rates another half percentage point next week."
The U.S. central bank's policysetting Federal Open Market Committee meets on Tuesday. It already has cut rates nine times this year but the economy was losing steam even before the Sept. 11 attacks, which are widely regarded as having been the straw that broke the record expansion's back.
Earlier this week, the government reported the nation's gross domestic product, the broadest measure of total economic activity, shrank at a 0.4 percent rate in the third quarter. It is expected to contract again in the current quarter, meeting the official definition of a recession in which national output shrinks for at least six months.
Financial markets were unbowed in the face of the bleak economic data, with the Dow Jones Industrial Average ahead about 66 points at midday and the Nasdaq composite index up about 12 points.
The dollar was stable, apparently on the belief that other parts of the global economy may encounter a steeper recession and have more difficulty putting stimulative policies into place than the United States.
The job losses were broad-based in October. Goods-producing companies cut 174,000 people from payrolls, nearly twice the 90,000 who were cut in September.
But service-producing companies engaged in everything from transportation to retail trade chopped a whopping 241,000 people, double the 123,000 who were shed in September.
Despite the spike in the October unemployment rate to 5.4 percent, Sohn noted that this was only half the nearly 11 percent rate hit during the 1981-82 recession -- the steepest downturn in the post-World War Two period.
Nor does the rate approach European unemployment levels. In September, 9.1 percent of the French workforce was unemployed and 9 percent of Germans were out of work.
In addition, it was well below the Canadian rate of 7.3 percent last month, reported by the Canadian government on Friday, demonstrating the U.S. economy's durability after a record period of expansion during the 1990s when hundreds of thousands of jobs were created.
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