September Expected To Show More Job Losses
RENEE MONTAGNE, host:
Well, maybe not a surprise, but brace yourself. Weekly unemployment claims hit their highest level in seven years, and analysts expect the government's latest unemployment report, out today, will show that the economy lost a hundred thousand jobs last month. NPR's Frank Langfitt reports.
FRANK LANGFITT: Almost half a million people filed first-time unemployment claims during the last full week in September. That's from the Labor Department. And it includes people who lost jobs due to Hurricanes Ike and Gustav. But half a million claims is a lot. The last time the U.S. saw a number like that was just after the terrorist attacks of 9/11. For months, economists have talked about the resilience of the American economy, but that optimism is fading.
Dr. DAVID WEISS (Chief Economist, Standard & Poor's): I think the hope of avoiding a recession has largely gone away.
LANGFITT: That's David Weiss. He's chief economist at Standard & Poor's. Weiss says there's at least one bright spot among the economic data. The government says gross domestic product actually grew in the spring. But Weiss finds the continuing job loss more telling.
Dr. WEISS: The declines have been going on for so long that it's hard not to call this a recession, even if GDP stays positive. To me, when you get nine consecutive declines in payrolls, it's a recession, regardless of what GDP says.
LANGFITT: Given the economy's many problems, the job market could be worse by now. Since January, the U.S. has lost an average of 75,000 jobs a month. That's painful, but it's not nearly as bad as the last recession seven years ago. During a similar stretch back then, job losses averaged nearly 200,000 a month. Recently, though, layoffs in struggling sectors like autos and real estate have spread.
Dr. WEISS: The problem is now you're getting enough layoffs in those areas that it's affecting the overall level of consumer spending, of services. And you're starting to see weaknesses almost everywhere.
LANGFITT: Many analysts now talk about how deep and long a recession might run. Jay Bryson is global economist with Wachovia.
Dr. JAY BRYSON (Global Economist, Wachovia): I think it's going to become more of a modest recession now, that is, it's starting to get a little worse. We'll probably have, our guess is, three consecutive quarters of negative GDP growth probably starting in the third quarter and lasting until early next year.
LANGFITT: One common definition of a recession is six straight months of negative GDP growth. That means the output of the economy actually shrinks. Bryson says he expects more layoffs because it's becoming harder to get loans. The financial crisis has made banks more reluctant to lend to each other and to some customers as well. David Weiss of Standard and Poor's says all eyes are now on credit.
Dr. WEISS: The credit markets will determine how long the recession lasts and how deep it goes. If they remain frozen like they are now, it's hard to see how we can get out of this thing anytime soon, because if businesses can't borrow, they can't hire.
LANGFITT: And hiring is just what the economy needs to offset continuing layoffs in construction, manufacturing and, more recently, finance itself. Frank Langfitt, NPR News, Washington.