Jobs Plunge Shows Economy In 'Freefall' Nearly 600,000 jobs were cut from payrolls last month and the nation's unemployment rate jumped to 7.6 percent — its highest level since 1992. Economist Mark Zandi says businesses are "panicked. They're fighting for survival and that means they're slashing investment and jobs."
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Jobs Plunge Shows Economy In 'Freefall'

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Jobs Plunge Shows Economy In 'Freefall'

Jobs Plunge Shows Economy In 'Freefall'

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MELISSA BLOCK, host:

The Senate received some extra motivation to reach a stimulus compromise today in the form of new numbers from the Labor Department. Almost 600,000 jobs were lost in January; that's the most since 1974. An unemployment rate at 7.6 percent - that's the highest it's been since 1992. Economists predicted the numbers would be bad, but this is even worse than expected.

NPR's John Ydstie has more.

JOHN YDSTIE: The huge job loss in January is the worst monthly decline since 1974. In fact, during the past three months, the U.S. economy has shed more than 1.5 million jobs. It's bad, says Mark Zandi of Moody's Economy.com.

Mr. MARK ZANDI (Moody's Economy.com): The economy is in freefall. Businesses are panicked. They're fighting for survival, and that means they're slashing investment in jobs.

YDSTIE: Zandi says businesses know banks aren't interested in giving them new loans, so they're desperate to preserve cash and are cutting costs dramatically. For most businesses, the biggest cost is labor. Zandi says today's numbers suggest job losses are accelerating.

Mr. ZANDI: We've lost about 3.5, 3.6 million jobs since the job losses began. So the problems are intensifying; no sense of any stabilization. In fact, things seem to be unraveling.

YDSTIE: At the White House, President Obama seized on the massive job losses to put pressure on Congress to pass the stimulus package.

President BARACK OBAMA: These numbers demand action. It is inexcusable and irresponsible for any of us to get bogged down in distraction, delay or politics as usual while millions of Americans are being put out of work.

YDSTIE: The president reminded the audience, which had gathered for the introduction of his Economic Recovery Advisory Board, that the reduction in payrolls is not just an abstraction.

President OBAMA: Somewhere in America, a small business has shut its doors. Somewhere in America, a family said goodbye to their home. Somewhere in America, a young parent has lost their livelihood, and they don't know what's going to take its place. These Americans are counting on us, all of us in Washington. We have to remember that we're here to work for them. And if we drag our feet and fail to act, this crisis could turn into a catastrophe.

YDSTIE: The stimulus package passed the House last week. It's run into delays in the Senate. But Senate leaders hope for a vote as early as this evening. Republicans have criticized the package for not having enough tax cuts. A bipartisan group of senators thinks its cost, now more than $900 billion, is just too high. They're trying to find 90 billion in cuts. For his part, economist Mark Zandi says the stimulus package is not big enough.

Mr. ZANDI: Given the severity of the situation, the overall package is too small. It should be bigger. And I think because of the severity of the current situation, the fact that the economy needs help now, in 2009, that argues for more tax cuts, temporary tax cuts.

YDSTIE: Zandi says the most effective tax cut would be a temporary payroll tax holiday in the third quarter of this year. Allowing both businesses and workers to forgo payment of those Social Security and Medicare taxes for three months late next summer would put money in their hands when they'll need it most, he says. Stocks rose sharply after the jobs report. Analysts said that's partly because investors believe the bleak news will force Congress to pass the stimulus quickly.

John Ydstie, NPR News, Washington.

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