The US economy lost more than half a million jobs in January for the third month running, figures showed on Friday, marking the deepest cut in 34 years.
The number of jobs lost last month reached 598,000, while the unemployment rate – 4.4 per cent before the credit crisis – jumped to 7.6 per cent in January, its highest level since 1992.
Economists had expected non-farm payrolls to drop by 525,000 and the unemployment rate to rise to 7.5 per cent, up from 7.2 per cent the month before. The total number of job losses since the recession began in December 2007 has now reached 3.6m, with half of this decline occurring during the last three months, according to the Bureau of Labor Statistics.
Friday’s results raised the sense of urgency for the US government to pass a stimulus package. Christina Romer, chair of the President’s Council of Economic Advisers, said that without fiscal action the US economy could lose millions more jobs and the unemployment rate could reach double digits.
“The situation could not be more serious,” President Barack Obama said on Friday, pushing Congress to pass a proposed economic recovery package. “These numbers demand action.”
The data did little to dent risk appetite in global equity markets, however, as investors continued to focus on the US government’s plans for further intervention in the financial system. US stock futures and European markets remained in positive territory.
The dollar consolidated its gains against the yen, rising 0.6 per cent to Y91.66, and edged 0.1 per cent higher to SFr1.1718 against the Swiss franc but was little changed against the euro at $1.2796.
The yield on the two-year Treasury note was little changed at 0.9 per cent while the yield on the 10-year Treasury note was 3 basis points higher at 2.943 per cent.
”These employment numbers are dreadful, but does it matter?” said Alan Ruskin, senior analyst at RBS’s global banking and markets division. “Not for the market today. All the prior labour market indicators, notably the claims data, gave a feeling of foreboding before these numbers. The data broadly delivered.”
Few industries were spared from losses last month. The manufacturing sector lost 207,000 jobs, a 1.6 per cent drop and the biggest monthly decline since October 1982. Construction shed 111,000 jobs, the retail sector lost 45,000 and 42,000 jobs in financial services disappeared. The healthcare and private education sectors added jobs in the month.
“Another horrific report, showing job losses across the economy,” said Ian Sheperdson, chief US economist at High Frequency Economics.
A bright note was that hourly earnings rose 0.3 per cent in January and are up 3.9 per cent on the year. However, few economists expect this to last.
“With demand for labour evaporating, wage increases of this magnitude will be history very soon,” noted Joshua Shapiro, chief US economist at MFR.
Unemployment has risen by more than a full percentage point since September, when the crisis intensified with the collapse of Lehman Brothers. There was also a further rise in the number of discouraged workers no longer actively seeking employment. According to economists at RDQ Economics, adjusting for those who would like a job but are not looking, the unemployment rate is 10.8 per cent.
Earlier this week the monthly survey from ADP Employer Services, which tracks private non-farm payroll employment, showed further deterioration in the labour market. That result was better than economists expected and followed a more dire December report estimating 659,000 jobs lost after a revision.
The labour department also revealed on Thursday that the number of US workers claiming unemployment benefits for the first time surpassed 600,000 last week, reaching a new 26-year high. Initial jobless claims reached 626,000 in the week ending January 31, up from 591,000 the week before, pointing to further job losses in February.
Last month was marked by broad cuts from corporate bellwethers in the US and Europe, culminating on January 26 when companies slashed more than 76,000 jobs from their payrolls to confront the deepening economic downturn. The day was one of the most brutal yet for workers on both sides of the Atlantic.
US corporate groups such as Caterpillar, General Motors, Sprint Nextel and Home Depot led the retreat, as the domestic recession coupled with tough export markets continued to take a heavy toll on their businesses. Pfizer, the drugs group, added to the tally, saying jobs would be lost in its takeover of Wyeth.
Retailers have also been hit particularly hard this year, announcing several thousand job cuts, including 1,100 jobs at Saks and 7,000 at Macy’s. Most have also indicated that they are sharply reducing inventory levels.
Last week government figures showed that the US economy contracted by an annualised 3.8 per cent in the final quarter of 2008. It was a much smaller percentage than expected but still its worst performance since 1982.
http://www.ft.com/cms/s/0/34d6448a-f44d-11dd-8e76-0000779fd2ac.html
JPTF 2009/02/06
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