Sat 6 Sep, 2008 10:10 am
Posted on Fri, Sep. 05, 2008
Job losses hit 5-year high, reignite fears of new recession
Kevin G. Hall | McClatchy Newspapers
last updated: September 05, 2008
WASHINGTON " Recession fears are back with a bang and the economy is front and center in the political arena again after a Labor Department report Friday showed that the nation's unemployment rate leapt to 6.1 percent in August, employers shed jobs for the eighth consecutive month and revised numbers for earlier months showed even greater payroll hits.
Employers shed 84,000 jobs last month, the Labor Department said, and the unemployment rate moved up by a larger than expected four-tenths of a percentage point. There were job losses across most of the broad spectrum of U.S. employment, especially in the manufacturing, retail and construction sectors.
The strong 3.3 percent economic growth in the second quarter of this year, led by solid U.S. exports, had eased recession concerns. But Friday's jobs numbers pointed to a serious slowdown and erased any confidence about the economy for just about anyone outside the optimistic Bush administration.
"This thing is just lingering. It's almost like a storm that comes ashore and just kind of sits there," said Ken Goldstein, an economist with the Conference Board, a New York-based group that publishes indices of consumer sentiment. "We've seen declines every month, all year long, right through August. But the declines have started to intensify, and that will continue through the end of the year, very likely into the first months of 2009."
Some are certain that recession lurks.
"This is a very weak jobs report that screams recession," wrote John Ryding and Conrad DeQuadros, partners in the New York forecasting firm RDQ Economics.
Peter Kretzmer, a Bank of America economist, added in a note to investors that the "rapid rise in the unemployment rate points to a U.S. recession, as such an increase has never occurred outside of one."
Recession fears have reignited on evidence that job losses are picking up steam. The Bureau of Labor Statistics on Friday revised the June and July unemployment numbers upward, virtually doubling the original estimate for June job losses from 51,000 to 100,000. Most of the job losses this year " 1.75 million " have come since April.
"Over the past 12 months, the number of unemployed persons has increased by 2.2 million and the unemployment rate has risen by 1.4 percentage points, with most of the increase occurring over the past four months," the BLS report said.
In August, 9.4 million Americans were unemployed.
The number of long-term unemployed " those jobless for 27 weeks or more " rose by 163,000 to 1.8 million, an increase of 589,000 over the past 12 months. The newly unemployed, jobless for fewer than five weeks, rose by 400,000 in August.
It all points to a deeper slowdown, just as the presidential election heats up.
"We expect growth to slow in the current quarter to just over 1 percent and then turn negative in the fourth quarter," said Nigel Gault, the chief U.S. economist for forecaster Global Insight in Lexington, Mass.
The jobs report became fodder for the presidential campaigns Friday. Democrat Barack Obama linked Republican rival John McCain to President Bush's economic policies, and McCain promised to fight for a better economy.
Only the Bush administration expressed optimism.
Commerce Secretary Carlos Gutierrez, in an interview with McClatchy, pointed to the strong second-quarter growth to suggest that the economy is stronger than it appears.
"The fact that we grew 3.3 percent in the second quarter is very different to the scenario that the really bleak forecasters would have you believe," he said.
Pointing to the impact of rising energy costs on auto manufacturers, Gutierrez said that was why "we really do need to get on with the future and start drilling for oil."
The Department of Energy has said that new U.S. oil production is unlikely to have much impact on global oil prices, and most new drilling operations would take years before they resulted in significant oil production.
ON THE WEB
The Labor Department report
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