Unemployment Rate Spikes to 16-Year High
MICHELE NORRIS, host:
From NPR News, this is All Things Considered. I'm Michele Norris.
MELISSA BLOCK, host:
And I'm Melissa Block. The U.S. economy lost another half million jobs in December, and the nation's unemployment rate jumped from 6.8 to 7.2 percent. That's according to a grim report issued this morning by the Labor Department. It said businesses cut 2.6 million jobs in 2008. Most of those jobs disappeared over the past few months, which suggest that the downturn in the labor market is worsening. NPR's Jim Zarroli reports.
JIM ZARROLI: As 2008 drew to a close, the country was hemorrhaging jobs at a rate not seen since 1945, when the wartime economy was sputtering to a finish. Nearly every sector of the economy lost jobs, except for healthcare and education, and even there the growth was anemic. For President-elect Obama, the report was another sobering reminder that his first term in office is likely to be dominated by the kind of economic crisis not seen in many years. He spoke to reporters today.
(Soundbite of speech)
President-elect BARACK OBAMA: Clearly, the situation is dire. It is deteriorating, and it demands urgent and immediate action.
ZARROLI: The numbers made clear how much the labor market has deteriorated in recent months. Nariman Behravesh, chief economist at IHS Global Insight, says for much of last year, the economy was losing jobs, but there were pockets of strength like the service sector. Things grew much worse, he says, after the collapse of Lehman Brothers.
Dr. NARIMAN BEHRAVESH (Chief Economist, Global Insight): It really does look like both the U.S. economy and the jobs market sort of fell off a cliff starting in September sometime.
ZARROLI: The collapse of Lehman shattered investor confidence in the financial markets and made the credit crunch a lot worse. Companies could no longer borrow the money they needed to operate. Consumer spending fell. And Campbell Harvey, professor of finance at Duke University, says companies responded by shedding jobs at a faster rate.
Dr. CAMPBELL R. HARVEY (Finance, Duke University): The acceleration is a direct result of corporations going into survival mode, which means they're going to slash employment, they're going to slash capital spending, and whether a discretionary spending will also be slashed.
ZARROLI: And there is still slashing, Harvey says. Like a lot of economists, he says this is no ordinary recession, and he believes it will take a while to play itself out.
Dr. HARVEY: Usually, you can see a few pieces of information that suggest the light at the end of the tunnel. Right now, all you see is evidence of deceleration.
ZARROLI: For instance, today's report showed a drop in the length of the average work week, which fell to its lowest level since the government began keeping records in 1964. Nariman Behravesh notes that companies will often reduce their employees' hours before laying them off altogether.
Dr. BEHRAVESH: A decline in the work week is actually an early warning of much more trouble to come in the sense that a lot of businesses will cut back hours first and then cut back jobs.
ZARROLI: So, when the average work week drops, Behravesh says, it's a sign that the pace of layoffs could increase. Behravesh says he's not sure what it would take to stop the erosion of U.S. of payrolls. He notes that if Congress and the new administration enact a big, bold stimulus plan and do it quickly, the job market could begin to turn around by the end of 2009. But there are already signs of disagreement between Congress and the new administration over the stimulus package. Behravesh says, if they get bogged down in political fighting, then fixing the economy will take a lot longer. And in that case, the unemployment rate could keep climbing for the foreseeable future. Jim Zarroli, NPR News, New York.