Jobless Rate at 14-Year High of 6.5%

November 7, 2008 at 4:50 am Leave a comment

jobless-rate.jpgThe nation’s unemployment rate
bolted to a 14-year high of 6.5 percent in October as another 240,000
jobs were cut, stark proof the economy is almost certainly in a
recession.

The new snapshot, released Friday by the Labor Department, showed
the crucial jobs market deteriorating at an alarmingly rapid pace.

The jobless rate zoomed to 6.5 percent in October from 6.1 percent in September, matching the rate in March 1994.

Unemployment
has now surpassed the high seen after the last recession in 2001. The
jobless rate peaked at 6.3 percent in June 2003.

October’s
decline marked the 10th straight month of payroll reductions, and
government revisions showed that job losses in August and September
turned out to be much deeper. Employers cut 127,000 positions in
August, compared with 73,000 previously reported. A whopping 284,000
jobs were axed in September, compared with the 159,000 jobs first
reported.

So far this year, a
staggering 1.2 million jobs have disappeared. Over half of the decrease
occurred in the past three months alone.

Although
the unemployment report was worse than expected, and Ford Motor Co.
reported dismal third-quarter results and announced plans to cut more
than 2,000 additional white-collar jobs, investors seemed attracted by
stock prices beaten down the past two sessions. The Dow Jones
industrial average was up about 50 points in morning trading and
broader market indexes also are higher.

About
10.1 million people were unemployed in October, an increase of 2.8
million over the past year. A year ago, the unemployment rate stood at
4.8 percent.

The employment market is
much weaker than economists expected. They were forecasting the
unemployment rate to climb to 6.3 percent in October and for payrolls
to fall by around 200,000.

Job losses were widespread, reflecting the mounting carnage from a trio of crises — housing, credit and financial.

Factories
cut 90,000 jobs, the most since July 2003. Construction companies got
rid of 49,000 jobs with heavy losses in home building. Retailers cut
payrolls by 38,000. Professional and business services reduced
employment by 45,000. Financial activities cut 24,000 jobs, with heavy
losses in mortgage banking and at securities firms. Leisure and hospitality axed 16,000 positions.

All those losses more than swamped some gains elsewhere, including in the government, as well as in education and health care.

Racing
to assemble his new Democratic Cabinet, President-elect Barack Obama
will huddle with economic advisers later on Friday. His team has been
in close contact with the Bush administration to pave the way for a
smooth hand-off of power.

All the
economy’s woes — a housing collapse, mounting foreclosures, hard-to-get
credit and financial market upheaval — will confront Obama when he
assumes office early next year. And, the employment situation is likely
to get worse.

Many expect the jobless rate
to climb to 8 percent, possibly higher, next year. In the 1980-1982
recession, the unemployment rate rose as high as 10.8 percent before
inching down.

To provide fresh relief,
House Speaker Nancy Pelosi said Democrats, in a lame-duck session later
this month, are pushing to enact another round of economic stimulus of around $100 billion.

Average hourly earnings rose to $18.21 in October, a 0.2 percent increase from the previous month, according to the Labor Department report.
Over the past year, wages have grown 3.5 percent, but paychecks aren’t
stretching that far because high food, energy and other prices has
propelled overall inflation at a faster pace.

To prevent the country from sinking into a deep and painful recession, the Federal Reserve last week ratcheted down interest rates to 1 percent and left the door open to further reductions.

The economy has lost its footing in just a few months. It contracted at
a 0.3 percent pace in the July-September quarter, signaling the onset
of a likely recession. It was the worst showing since 2001 recession,
and reflected a massive pullback by consumers.

As U.S. consumers watch jobs disappear, they’ll probably retrench even further, spelling more trouble for the sinking economy.

That’s why analysts predict the economy is still shrinking in
the current October-December quarter and will contract further in the
first quarter of next year. All that more than fulfills a classic
definition of a recession: two straight quarters of contracting
economic activity.

Source: AP

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Entry filed under: Finances, National. Tags: , , , , , , , .

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