Just about everyone was expecting a gloomy unemployment report from the Labor Department on Friday morning. Economists had expected a loss of 200,000 jobs in October because of the financial crisis.
As it turns out, the news was even worse than that: The nation's unemployment rate rocketed to a 14-year high of 6.5 percent, and employers cut some 240,000 jobs in October. To put that in perspective, 1.2 million jobs have vanished so far this year.
The latest surge in joblessness is just one more indication — amid a sea of other bleak economic reports — that the economy took a precipitous dive last month and is likely already in recession. The unemployment rate has now surpassed the high seen after the last recession in 2001. In June 2003, the jobless rate peaked at 6.3 percent.
Barack Obama's administration will come into office in January having to deal with what looks like the U.S. economy's steepest decline in decades. October marked the 10th straight month of payroll reductions.
The president-elect is expected to address the jobless report later Friday, after meeting with economic advisers on his transition team. The group includes such luminaries as billionaire Warren Buffet and former Federal Reserve Chairman Paul Volker.
In the meantime, investors seemed to have anticipated the bad news and took it in stride. The Dow Jones Industrial average closed up 248 points to 8,943, recovering somewhat from two days of steep losses.
The total number of jobless Americans last month jumped to 10.1 million, the highest level in 25 years, according to Labor Department figures. After the report, a host of analysts started downgrading their projections for the economy. Goldman Sachs, for example, sees the unemployment rate hitting 8.5 percent by the end of 2009.
Digging deeper into the numbers, the Labor Department report showed that the job losses were across the board. Factory payrolls fell 90,000 last month — the biggest drop since July 2003 — after falling 56,000 in September. Part of that decline can be accounted for by a recently ended strike by 27,000 machinists at Boeing, the department said. Builders were hit, too. The housing slump had them shedding 49,000 jobs last month. Financial companies cut 24,000 jobs, after firing 16,000 last month.
Service industries — from restaurants to retailers — cut 108,000 workers in October. The September number was almost twice that — 201,000. Job losses in August and September turned out to be deeper than originally reported as well. 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.