Recession winds are blowing with gale force as U.S. employers shed 533,000 jobs in November, pushing the unemployment rate to 6.7%. The Dec. 5 announcement by the Bureau of Labor Statistics provided yet more evidence that the economy is losing jobs at the fastest pace in more than three decades. "It's very clear that the U.S. is in a pretty deep recession. There really aren't any safe harbors in this storm," says Adam York, an economic analyst at Wachovia (WB) in North Carolina.
The November job cutting was dramatically worse than expected, with estimates by economists ranging from 220,000 to 470,000, with a median forecast of 333,000 job cuts, according to a Bloomberg survey. The cuts last month came from a variety of sectors—manufacturing, construction, financials, retail, travel and tourism. Only a few areas recorded employment gains, including education, health care and government. The rate rose from 6.5% in October.
The news comes one day after a slew of large companies such as AT&T (T), Credit Suisse (CS), and others announced major layoffs. The Dec. 4 layoff announcements came from, among others, AT&T (12,000 jobs), DuPont (DD) (2,500), Avis Budget (CAR) (2,200), NBC Universal, Honda Motor (HMC), Viacom (VIA), and Windstream (WIN).
Companies are cutting jobs to try to preserve profits—or minimize losses—at a time when consumer demand is abruptly drying up and banks are tightening lending standards. An all-out effort by the federal government to provide fiscal and monetary stimulus should get gross domestic product growing again by the second half of 2009, many economists believe. But even after GDP is growing, companies are likely to keep shedding jobs. Wachovia predicts that the unemployment rate will keep rising until mid-2010, topping out around 9%.
DROP IN SHOPPING IMPACTS THE JOBS NUMBERS
How bad are these numbers? Worse than in the 1990-91 recession, whose worst month saw 306,000 lost jobs, or the 2001 recession, whose worst month was a loss of 325,000 jobs. The U.S. economy lost 431,000 jobs in May 1980, which was the worst month of the back-to-back recessions of 1980-82. If it's any comfort, though, November's showing was better than the recession month of December 1974, when the economy lost a staggering 602,000 jobs, according to the Bureau of Labor Statistics.
One factor that's likely to account for a large portion of the winter 2008 job losses is the tepid shopping season. The government's seasonal adjustment attempts to filter out ups and downs in employment caused by seasonal factors like holiday shopping. So when retailers ramp up employment less than they have in the past, it shows up as an outright employment decline in the seasonally adjusted data, notes Ellen Zentner, senior U.S. economist for Bank of Tokyo-Mitsubishi UFJ in New York.