How Low Has The Economy Sunk?
SCOTT SIMON, host:
This is Weekend Edition from NPR News. I'm Scott Simon. The recession is getting demonstrably worse. The U.S. Labor Department says the United States lost 533,000 jobs last month. That's a lot more than most analysts had expected. It is the worst month in the job market since 1974, and it likely means the country is heading into the worst recession in nearly 30 years. NPR's Chris Arnold reports.
CHRIS ARNOLD: When that job loss number came out yesterday, it definitely looked bad. To find out just how bad, I called Nariman Behravesh. He's the levelheaded chief economist at Global Insight. It's a major economic forecasting firm.
Dr. NARIMAN BEHRAVESH (Chief Economist and Executive Vice President, IHS Global Insight): The only way to describe this is this number is horrible and it's very scary. Not only did we lose 533,000 jobs in November, but prior months were revised down. So, all told we've lost nearly two million jobs this year in the U.S. economy.
ARNOLD: And we lost more than a quarter of those just last month. Part of what's happening is that in just the past few months, credit has tightened a lot. It's gotten harder to get home loans, auto loans, credit cards, business loans. Also consumer confidence has dropped sharply. That's led to a big pullback in spending. And all that's resulting in a lot of job cuts.
Dr. BEHRAVESH: Perhaps the scariest thing in the report is the fact that the service sectors, which generate about 80 percent of the jobs in the United States, are getting hit so hard. And it's pretty much across the board with the exception of health care and education. They are still slightly in positive territory.
ARNOLD: The unemployment rate is now at 6.7 percent. Behravesh says it could easily go above nine percent by the end of next year. And he says it might even get as bad as the 10-plus percent we saw in a severe recession in the early 1980s. That's got a lot of business executives nervous.
Mr. ERNEST SCHEIDEMANN (Executive Vice President and Chief Financial Officer, Allen Systems Group): We expect, you know, a really tough economic environment in 2009.
ARNOLD: Ernest Scheidemann is the chief financial officer of Allen Systems Group. It's a computer systems consulting firm based in Naples, Florida, with 1,400 employees. Scheidemann says business actually hasn't been that bad, but there is so much uncertainty that the company's dramatically cut back its hiring.
Mr. SCHEIDEMANN: We would have had growth plans. We would have had hiring plans. And at this point those plans are minimal until we see how 2009 begins to unfold.
ARNOLD: This combination of hiring freezes and job cuts is likely to keep pushing unemployment higher. John Graham is a finance professor at Duke University who's just finished a survey of about a thousand financial executives at companies around the world.
Dr. JOHN GRAHAM (Professor of Finance, Duke University): We were looking across all industries. We're hearing from CFOs that there will be job losses. The bad news is we kind of expect it to continue to get worse over the next several months into 2009.
ARNOLD: The problem is all this can snowball. Higher unemployment means less consumer spending. That means more layoffs. And the cycle continues. Nariman Behravesh.
Dr. BEHRAVESH: I'm beginning to worry that we're in a downward spiral that may be very hard to stop.
ARNOLD: But there is one bright spot here. If you look back to that severe recession in the early 1980s, inflation was very high. That tied the government's hands and stopped it from doing more to boost the economy. This time around, the inflation rate is low. So Behravesh says the government can take powerful steps, such as a massive stimulus plan.
Dr. BEHRAVESH: This is exactly what's needed. And this is the time for the government not to hold back but to go in all guns blazing, as it were.
ARNOLD: One tool the government's used effectively in just the past couple of weeks is that it started to succeed in pushing down interest rates for home loans. If it keeps doing that, that could allow a lot of Americans to refinance into cheaper loans and put hundreds of extra dollars a month into millions of people's pockets. Chris Arnold, NPR News.