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Economic Indicators Continue Nose Dive
Half-Million Jobs Cut: Worst Month Since 1974

By Neil Irwin and Steven Mufson
Washington Post Staff Writers
Saturday, December 6, 2008

Employers slashed jobs in almost every industry and in vastly higher numbers than expected last month, according to government data released yesterday, making November one of the worst months in modern history for American workers.

Employers cut 533,000 net positions from their payrolls, the highest monthly total since 1974. The Labor Department also sharply revised its estimates of losses in September and October, indicating that 200,000 more jobs were cut than forecast. The unemployment rate rose to 6.7 percent from 6.5 percent and would have risen much more except that many jobless people gave up even trying to find work.

In a vivid sign of how dire the situation now looks for the U.S. and global economies, the price of oil continued its steep fall yesterday on expectations that a weak economy will mean less demand. Crude oil traded under $41 a barrel, down from $54 a week ago. And the proportion of homeowners who are behind on their mortgage payments or in foreclosure rose to an all-time high in the third quarter, the Mortgage Bankers Association said, with about one in 10 U.S. mortgages in such trouble.

The damage in the labor market was spread across almost every industry -- health care, education and government were the only sectors that created jobs -- and caught even pessimistic analysts off guard. It is all but certain that the jobless rate will rise further in the coming months, economists said, and some now forecast it will top 10 percent by the end of 2009.

Indeed, the economy is unraveling so fast as to defy analysis through the usual statistical models. Among the phrases found in normally sober reports from the nation's top economic forecasters yesterday: "god-awful," "wholesale capitulation," "shockingly weak" and "indescribably terrible."

"The numbers here are truly horrific," said Bernard Baumohl, chief global economist at the Economic Outlook Group, a consultancy. "It is clear this economy is now deteriorating with frightening speed and ferocity."

The results are likely to add urgency to efforts to enact a massive government spending program to try to stimulate the economy, measures that Congress plans to take up in the coming weeks with an eye toward having a bill passed soon after President-elect Barack Obama is inaugurated next month. Obama said in a statement yesterday that the economy is "likely to get worse before it gets better" and restated his call for stimulus. President Bush, speaking to reporters, stressed that actions taken to ease the financial crisis will take time to work.

A federal stimulus package, which could approach $1 trillion and will likely include aid for state governments and money for infrastructure projects, would take months to filter through the broader economy.

"We have to pin all of our hopes on government spending at this point," said Scott Anderson, a senior economist at Wells Fargo. "I don't see any other growth drivers out there for 2009."

Employers have shed jobs each month in 2008, but for the first half of the year, those losses were at a steady pace that suggested only a mild recession was underway. In late summer, as the financial crisis deepened and the housing market decline accelerated, corporate America became even more conservative about hiring decisions, bracing for a longer and more severe recession.

September and October were weak months, but in line with past recessions. The job cuts in November, by contrast, were outside the realm of any recent experience.

In particular, service employers, who had been a source of strength to the job market for much of the year, are now slashing jobs dramatically. Hotels and restaurants cut 54,000 positions, temporary-help firms cut 78,000 and financial companies cut 32,000.

And, reflecting expectations for a gloomy holiday season, retailers did only about two-thirds as much holiday hiring in November as they would in a normal year. Once adjusted for ordinary seasonal variations, retailers cut 91,000 jobs.

But severe as the damage is for those who sell directly to consumers, economists were most struck by how broad-based the weakness was.

"It still would be ugly even if you added back retail," said Kurt Karl, chief U.S. economist for insurance company Swiss Re. "It's a widespread job cutting exercise that's going on."

While the jobless rate rose only modestly, the details of the report contained worse news for American workers. A broader measure of unemployment that includes people who want a job but are not actively looking and people who are working part time but would prefer a full-time job rose more steeply -- to 12.5 percent of the workforce, from 11.8 percent in October. A year ago, that rate was 8.4 percent.

That suggests that on top of the 10.3 million people who are unemployed, another 9 million Americans are out of work or not getting the hours they want due to the weak economy.

"I'm looking for a silver lining in this report, and I'm not finding it," said Anderson, the Wells Fargo economist.

The broad economic weakness is perhaps most visible in the plummeting price of crude oil, which is down 25 percent since Nov. 28 and had its biggest one-week drop since 1991. Crude oil dropped to just under $41 a barrel yesterday on the New York Mercantile Exchange, down from an intraday peak of $147 in July.

The drop in prices is reordering consumer priorities. The steepest percentage drop in November sales of any major car brand was the fuel-sipping Toyota Prius, down 48 percent from November 2007.

Despite the steep fall in prices, the weak economy has kept U.S. oil consumption below last year's levels, though not as far below as it had fallen in September. U.S. petroleum demand during the four weeks ended Nov. 28 was down 6.2 percent from a year earlier, an Energy Department report said.

"It was a price issue and now it has become an economy issue," said Rob J. Routs, executive director of oil products and chemicals and a member of the board of Royal Dutch Shell.

The drop in prices is providing a boost for consumers and the U.S. economy overall. The cost of importing crude oil and refined products was more than $30 billion lower in November than in July, according to statistics from the Energy Department and the Organization of the Petroleum Exporting Countries. That provides a stimulus to the economy at a critical time, economists said.

Oil exporting countries, however, are watching the falling prices with growing alarm. The president of OPEC, Chakib Khelil, told Algerian television that if prices remain at this level, the group would make "an important reduction" in output at its Dec. 17 meeting.

In a report issued yesterday, the International Energy Agency lowered its forecast for world oil consumption compared with expectations issued in July: 700,000 barrels a day lower in 2008, 1.4 million barrels a day lower in 2009 and 2.9 million barrels a day lower in 2013.

"The global market has been turned upside down since the summer by the impact of earlier high prices, an economic slowdown and resultant plunge in crude prices, and by an evolving credit crisis," a new IEA report said.

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