Jobless Rate At 16-Year High Of 7.2 Percent

The nation's unemployment rate shot up to 7.2 percent last month. It's the highest level in nearly 16 years. Governments and businesses cut more than half a million jobs in December. For all of 2008, the economy lost 2.6 million jobs.

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ARI SHAPIRO, host:

We have a new jobs report to tell you about this morning, and the news is not good. The nation's unemployment rate last month shot up to 7.2 percent. The government and businesses cut 524,000 jobs in December. Joining us now is NPR's Yuki Noguchi to discuss this report. Morning, Yuki.

YUKI NOGUCHI: Morning.

SHAPIRO: OK, well, we already know that 2008 was a terrible economic year. Do these numbers show it was worse than we thought?

NOGUCHI: Well, yes and no. I mean, some had predicted much bigger job losses last month. However, what's more telling is that in October and November, which, as you know, were already terrible months, turned out to be worse than thought. Labor Department revises the year for those months and is now saying an additional 154,000 jobs were lost during that time. So, job loss really accelerated towards the end of the year, and now, the total jobs lost for all of last year? A whopping 2.6 million.

SHAPIRO: Wow. So, not only was December terrible, but October and November were worse than we thought. Well, when you break this down sector by sector, were there any bright spots at all?

NOGUCHI: Not many. Many of the jobs lost came from manufacturing and construction, as well as retail, which usually rises toward the end of the year, and the only sectors that didn't lose jobs were government, medical and education. Also, there's what economists call the invisible jobless, which are people who are discouraged and stop looking for work, or are part-time workers who can't find full-time jobs, and if you factor that in, some people say the actual number of people looking for jobs at the moment is closer to 13 or 14 percent. And you know, the unemployment numbers are really just talking about people who are looking for jobs.

SHAPIRO: Ah, I see.

NOGUCHI: And here's what John Silvia, who's chief economist with Wachovia Financial, told me this morning.

Dr. JOHN SILVIA (Managing Director and Chief Economist, Wachovia Corporation): The bright spot is the negative story, that the downdraft in jobs was so severe in the fourth quarter that we have seen the worst, in terms of the single biggest quarter for job losses and a decline in GDP.

NOGUCHI: So, basically, he's saying that while unemployment will continue to get worse, it won't be falling quite as quickly this year.

SHAPIRO: Hm. Well, put this in some historical context for us. How bad is it compared to previous years and decades?

NOGUCHI: Well, economists point to the early 1980s and post-World War II recessions as a kind of model for what's happening now. They say this isn't a regular recession, where businesses experience a kind of mild down cycle; it's a major structural change. And John Silvia says that a lot of that has to do with giving consumers more and more access to credit over the last four decades. So, let's take a listen.

Dr. SILVIA: And what we're finding out now is that perhaps, in many cases - in terms of access to credit cards, auto loans, auto leases, home mortgages, subprime lending - we may have pushed the envelope too far.

SHAPIRO: Well, what does this bode for 2009, looking ahead?

NOGUCHI: Well, most economists think that the unemployment rate will continue to rise, at least through the first half of this year and maybe into the second half, even. It might reach 8.5 or even nine percent. Of course, this will be a major issue for the incoming Obama administration to contend with, and they're talking about creating and retaining three million new or - jobs or - you know, different jobs by investing in infrastructure, schools and new energy. But even if their economic stimulus package passes really swiftly, the effect just won't be immediate.

SHAPIRO: Hm. That's NPR's Yuki Noguchi on news this morning that the unemployment rate has jumped to 7.2 percent. The economy lost more than 524,000 jobs in December. It was a dismal coda to a year in which 2.6 million jobs were lost. Thanks, Yuki.

NOGUCHI: Thank you, Ari.

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SHAPIRO: This is NPR News.

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U.S. Unemployment Rate Jumps To 7.2 Percent

The nation's unemployment rate shot up at the end of the year, reaching 7.2 percent in December — its highest level since early 1993, according to a Labor Department report released Friday.

That puts U.S. job losses at 2.6 million for 2008. Unemployment accelerated after September; the lion's share of the cuts — 1.9 million jobs — came during the last four months of 2008.

The numbers were both better and worse than expected. The Labor Department said payroll declined by 524,000 during December, less than the 550,000 that economists had forecast for the month. But the agency also said it had underestimated payroll losses for October and November by 154,000.

Speaking before reporters, President-elect Obama said Friday that the report underscores the need for rapid passage of an economic stimulus package.

"Clearly, the situation is dire," Obama said. "It is deteriorating and it demands urgent and immediate action."

He added, "This is the time to act."

John Silvia, chief economist for Wachovia Financial, said the numbers show businesses cut swiftly and drastically; he sees that as a sign that the situation isn't likely to get worse this year.

"The bright spot is the negative story," Silvia said. "The downdraft in jobs is so severe in the fourth quarter that we've seen the worst in terms of the single biggest quarter for job losses and decline in GDP."

Silvia said he still anticipates unemployment could rise to 8.5 percent or 9 percent during this year.

Silva said the economy is undergoing a "fundamental restructuring." As in the early 1980s and during post-World War II years, the economy is shifting the way it does business and the way consumers spend money, he said. Most critically, this time around, the economy is trying to recover from four decades of expansion in consumer credit. The mortgage crisis has forced a kind of reckoning with the loose credit rules that had been driving the U.S. economy, he said.

Many of the lost jobs came from the manufacturing and construction sectors. Even retail posted a decline at the end of the year — and the sector wasn't helped by sluggish holiday sales and weak consumer spending. The only sectors that didn't show declines were government, education and health services.

Democratic Rep. Barney Frank of Massachusetts, who heads the House Financial Services Committee, called the jobs report "disastrous." He said in a statement that reversing the situation would require a large economic recovery plan, as well as the release of the second half of funds from the Troubled Asset Relief Program, initially passed to try to shore up the financial sector. Some $350 billion in TARP funds have yet to be tapped.

Economists expect the economy to show improvement around the middle of the year — particularly if the incoming Obama administration manages swift passage of an economic stimulus package. Obama has urged investment in infrastructure and education, among other things.

"The bad news is the fiscal stimulus takes time," said Diane Swonk, chief economist for Mesirow Financial in Chicago. "Infrastructure has a big payoff on it, but it takes a long time to get projects up and running."

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