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September Job Losses Underscore Depth Of Crisis

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September Job Losses Underscore Depth Of Crisis

Economy

September Job Losses Underscore Depth Of Crisis

September Job Losses Underscore Depth Of Crisis

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  • <iframe src="https://www.npr.org/player/embed/95357684/95357665" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

The U.S. economy lost nearly 160,000 jobs last month, according to data released Friday by the Labor Department.

Analysts say such a heavy decline is one more piece of evidence that the nation is in recession. Some say the economic problems are serious enough that the government's best hope is to simply try to control the damage.

When the numbers came out Friday morning, some economists contacted by NPR reported that the new data left them anxious, frightened — even depressed.

There were at least two things that worried them about the report.

Layoffs Spread

First, layoffs that began in troubled sectors like housing and construction are now apparent everywhere.

"We are seeing the job loss spread out now in areas it wasn't in — particularly in retail trade, even in leisure and hospitality, meaning restaurants and hotels," says Stuart Hoffman of PNC Financial.

The other worry about the job loss in September is the volume. In a year in which the nation has lost jobs every month, these results were by far the worst yet.

In fact, the last time the country saw such a steep decline was toward the end of the last recession, more than five years ago.

What Can The Government Do?

Gus Faucher at Moody's Economy.com says the economy is so weak now, there are limits to what the government can do. "Even with the bailout, I think the economy is likely to be in recession into 2009," Faucher says.

In Friday's report, the unemployment rate remained steady at 6.1 percent. But most economists expect it will rise in the coming months.

Impact Of Credit Crunch Felt

The nation's employment problem began with the housing slump. Now, says Diane Swonk of Mesirow Financial, a new culprit is emerging: the credit crunch. And it may affect workers in indirect ways.

For instance, Swonk predicts tighter credit will make it harder for stores to offer customers no-interest loans for furniture and TVs.

"Many of the retailers that offered zero percent financing, so you could buy a big-ticket item, they are not in a position now to offer those deals during the holiday season," Swonk says.

She says that will mean fewer sales — and eventually, fewer jobs at the companies that make those items.

John Silvia, an economist with Wachovia, describes the relationship between credit and jobs simply: If one contracts, the other will, too.

"Labor is combined with capital. If you cannot finance that capital, you don't add workers to a machine you don't have," he says.

Learning Lessons From The Past?

Amid the gloom, economists do find some hope: the government recognizes the problem.

Swonk says officials are acting far faster than they did before the Great Depression.

In recent weeks, the Fed has moved to prop up the banking system. And the Treasury Department is targeting toxic securities that are clogging up the credit markets.

"The bad news is, this is serious. The good news is, the understanding of it, of how to get out of it, of how to move forward, is much greater than it was. We are, in fact, learning the lessons of the past," Swonk says. "I don't think there is any denial left in Washington and there shouldn't be on Main Street about where we're at today."

Swonk says government action won't stave off a recession. But she thinks it could make the economic difficulties shorter and a lot less painful for the country.