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U.S.Jobless Rate Hits 7.2%, a 16-Year High
With the recession in full swing, U.S. employers shed 524,000 jobs in December, the government reported Friday, and a rapidly deteriorating economy promised more significant losses in the months ahead. December's job losses brought the total for 2008 to 2.6 million, spanning a recession that started 12 months ago.
The unemployment rate jumped to 7.2 percent in December from 6.8 percent in November and 5 percent last April, when the recession was four months old and just beginning to bite. More than 11 million Americans are now unemployed, and their growing ranks seem likely to put pressure on President-elect Barack Obama and Congress to act quickly on a stimulus package that mixes tax cuts and public spending.
President-elect Barack Obama said Friday that the alarming figures showed that Washington must act quickly and decisively to enact a stimulus plan. Behind the numbers, he said, are "real lives, real suffering, real fears."
Obama said he remained open to "a whole host" of ideas from Democrats and Republicans alike and was focused on getting something done rather than who gets credit for it. Asked at a news conference whether he was worried that some lawmakers think his proposed stimulus program, with a cost estimated at $775 billion, was too big, while others think it is too small, he said he was open to consultations with Congress.
But the president-elect said he would insist on quick action. "I have every expectation that we will get it done," he said. "You are assuming that I expected it to be easy," he told one questioner. "No."
The 7.2 percent was the highest unemployment rate since January 1993, when the country was still shaking off a jobless recovery from the 1990-91 recession. The loss in total jobs for 2008 was the largest since 1945.
"These numbers, back to back, of more than a half million a month suggest that the U.S. economy is in a freefall," said Nariman Behravesh, chief economist at IHS Global Insight. "It's scary, and it indicates that unless something is done and done quickly to turn this economy around, we're looking at an awful situation this year."
The toll of job losses cut across every sector. Nearly 800,000 manufacturing jobs were lost in 2008, and 630,000 construction jobs disappeared as home-building slowed. Jobs dried up in the financial sector, in publishing houses and trucking companies, department stores and hotels.
"This is unprecedented," said Mark Zandi, chief economist of Moody's Economy.com. "It's coast to coast. It's everywhere. There's really no refuge in this job market. There's no safe place."
In addition to rising unemployment, more Americans are working fewer hours or resorting to part-time jobs. The number of people working part-time rose to a seasonally adjusted 8 million in December from 7.3 million a month earlier. And the average length of a workweek for workers in non-management positions fell to 33.3 hours in December from 33.5 hours a month earlier.
"Even with a stimulus package, the unemployment rate is going to keep rising and by December it is likely to be over 9 percent," said David Levy, chairman of the Jerome Levy Forecasting Center. In a speech on the economy, Obama said Thursday that the unemployment rate "could reach double digits."
The accelerating job loss — more than one million jobs have disappeared in just two months — suggests that the recession will last at least into early summer, making it the longest since the 1930s. The severe recessions of the mid-1970s and early 1980s each lasted 16 months, the current record.
In his speech Thursday at George Mason University, Obama said that his American Recovery and Reinvestment Plan would "immediately jump-start job creation and long-term growth." Most forecasters, however, say that even with an ambitious stimulus plan, the economy will continue to contract through the first half of the year, though at a slower pace — and even if a recovery does kick in by early summer, it won't generate jobs for many months after.
"I would suspect that starting this past October and lasting through April, we will have really big job losses," said Robert Barbera, chief economist at the Investment Technology Group, a research and trading firm.
Just in October and November, 956,000 jobs disappeared (the November loss alone was 584,000, revised from 533,000), the Bureau of Labor Statistics reported. That was nearly 40 percent of the jobs that were eliminated since the recession began in December 2007.
"There was a change in psychology around the time the financial crisis devolved into a panic in September or October," said Mark Zandi, chief economist at Moody's Economy.com. "Businesses went from trying to hold on to their workers to laying them off in an effort to survive."
Since then, consumer spending and business investment have fallen precipitously and lenders have been reluctant to supply the credit that would be needed to lift private sector demand. In addition, demand is not likely to revive until consumers become more confident about the economy. Their confidence is at record low levels, several polls show.
But for all the job losses, the current recession, now in its 14th month, falls short of the mid-'70s and early '80s recessions, at least so far. The total number of men and women at work declined 2.7 percent in the 1974-75 recession and by 3.1 percent in 1981-82. In the current recession, the loss through November was under 2 percent.
"We are not yet near the numbers of those earlier recessions," Barbera said, "but five more months like what we have been having and we'll be there."