US companies slashed payrolls last month at the fastest pace in 34 years as the economy headed for its deepest and longest recession since World War II.
Employers cut 533,000 jobs, bringing losses so far this year to 1.91 million, the Labor Department said on Friday in Washington.
November’s drop exceeded all 73 forecasts in a Bloomberg News survey. The unemployment rate rose to 6.7 per cent, the highest level since 1993.
“It’s unbelievable,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts. “We’re well on our way to the worst recession of the postwar period.”
The plunge may spur incoming President Barack Obama to come up with an even bigger fiscal stimulus package than economists’ projections of about $700 billion.
Friday’s figures also will add to pressure on the Federal Reserve to take radical steps to revive credit markets and on lawmakers to bail out the auto companies.
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“This is a huge downshift, much larger than we thought,” said Jared Bernstein, an economist at the Economic Policy Institute in Washington, who will be Vice President-elect Joe Biden’s chief economist in the new administration. “The upper bound on a stimulus package is going up, not down. As the hole gets larger, the amount you need to fill it gets larger.”
Payrolls are likely to keep sliding into next year as the collapse in credit and slump in spending hurt companies from General Motors Corp to Citigroup Inc and AT&T Inc Legg Mason Inc, a Baltimore-based fund manager, said today it will eliminate 8 per cent of its workforce.
Obama said in a statement the job loss demonstrates the “urgent” need for a recovery plan and offers an “opportunity to transform our economy” through investments in infrastructure and alternative energy technology.
He aims to save or create 2.5 million jobs over two years.
Stocks sank. The Standard & Poor’s 500 index lost 2.3 percent to 825.51 at 10:11 am in New York.
Payrolls were forecast to drop by 335,000, according to the median estimate in the Bloomberg survey. The jobless rate was projected to rise to 6.8 per cent.
Revisions for September and October increased job losses by 199,000. The October figure was revised to 320,000 from the previous estimate of 240,000. November was the 11th consecutive drop in payrolls.
“You are seeing the impact of the lack of credit feeding through to a lot of companies, who are very fearful,” said John Silvia, chief economist at Wachovia Corp in Charlotte, North Carolina, and a former congressional staff economist. “Personal income numbers will be awful. It is going to be a difficult winter for a lot of people.”
Fed Chairman Ben S Bernanke this week outlined unorthodox policy action that officials can take beyond lowering interest rates. One option would be to purchase longer-term Treasuries on the open market to inject more cash into the financial system.
The central bank may also cut its benchmark rate from 1 per cent at its meeting December 15-16 in Washington. HSBC Holdings Inc economists today forecast the Fed will reduce it to zero, emulating the Bank of Japan’s efforts to defeat deflation earlier this decade.
Factory payrolls fell 85,000 after decreasing 104,000 in October, the Labor Department said. The slide would have been even worse without the return of 27,000 striking machinists at Boeing Co Economists had forecast a decline of 100,000 manufacturing jobs. The decrease included a loss of 13,100 jobs in auto manufacturing and parts industries.
US automakers have been particularly hard hit as sales last month dropped to the lowest level in 26 years. The top executives of General Motors, Ford Motor Co and Chrysler LLC this week appealed to Congress for as much as $34 billion in government assistance.
The Ann Arbor, Michigan-based Center for Automotive Research projects that a collapse of GM would lead to job losses totaling 2.5 million, including 1.4 million people in industries not directly tied to manufacturing. Chrysler yesterday announced it had cut 5,000 jobs last week.