The US lost the most jobs in five years in September and earnings rose less than forecast as the credit crisis deepened the economic slowdown.
Payrolls fell by 159,000, more than anticipated, after a 73,000 decline in August, the Labour Department said today in Washington. The jobless rate, the last one reported before the presidential election, remained at 6.1 per cent. Hours worked reached the lowest level since records began in 1964.
The world’s largest economy may be headed for bigger job losses as the worst financial meltdown since the Great Depression causes consumers and companies to retrench. A sinking labour market and rising borrowing costs raise the odds Federal Reserve policy makers will cut interest rates by their October 29 meeting.
“The financial panic is a body blow to business confidence, and companies are now battening down the hatches,” Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania, said before the report. “We’re in store for very sizable job losses across many industries. A rate cut by the Fed could come before the next meeting.”
Revisions added 4,000 to payroll figures previously reported for August and July. The Labour Department said it was “unlikely” that Hurricane Ike, which struck the Gulf Coast last month, “had substantial effects” on payrolls figures.
After today, the total decline in payrolls so far this year has reached 760,000. The economy created 1.1 million jobs in 2007.
Economists’ Forecasts: Payrolls were forecast to drop 105,000 after declining by a previously estimated 84,000 in August, according to the median of 76 economists surveyed by Bloomberg News. Estimates ranged from declines of 156,000 to 60,000. The jobless rate was projected to remain at 6.1 per cent.
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The misery index, which adds the unemployment and inflation rates, surged to 11.7 per cent in August, the highest level since 1991.
The jobless rate is up 1.4 percentage points from September 2007. Since World War II, the rate has risen only twice during similar periods before presidential elections. In both cases — when Bill Clinton defeated George H W Bush in 1992 and when Ronald Reagan beat Jimmy Carter in 1980 — the incumbent party lost the election.
Americans will go to the polls on November 4 and the October jobs report is due November 7.
“Voters are extremely angry, and they want someone to blame,” said Scott Anderson, senior economist at Wells Fargo & Co in Minneapolis.
Presidential Race: Democratic presidential nominee Barack Obama has opened up a lead over Republican rival John McCain in the aftermath of their first debate and amid growing concerns about the economy, according to a Pew Research Center survey taken September 27 to September 29. A mid-September poll from Washington-based Pew had shown the candidates were in a statistical dead heat.
Earlier in September, a Bloomberg/Los Angeles Times poll showed more respondents said Obama would do a better job handling the financial crisis than McCain, and almost half of the voters believed he had better ideas to strengthen the economy than his rival.
Factory payrolls fell 51,000 after decreasing 56,000 in August. Economists had forecast a drop of 57,000.
Today’s report also reflected the housing slump. Payrolls at builders declined 35,000 after falling 13,000. Financial firms decreased payrolls by 17,000, the most since November last year.
Pain at Retailers: Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 82,000 workers after eliminating 16,000 in the previous month. Retail payrolls slid by 40,100 after a 25,400 drop.
Government payrolls increased by 9,000, the smallest gain since January.
In the past month, Hewlett-Packard Co, the world’s largest personal-computer maker, announced it will cut 24,600 jobs, and auto-parts maker Federal-Mogul Corp said it would eliminate 4,000 positions globally.
The Senate passed a $700 billion financial-market rescue package earlier this week and the House of Representatives may vote on it today.
Marriott International Inc, the world’s largest hotel chain, yesterday reported third-quarter profit fell 28 per cent as US companies and consumers cut back on travel.
“Without action, the resulting credit squeeze could threaten businesses,” Chief Financial Officer Arne Sorenson said on a conference call. There are “tens of thousands of jobs at stake in our company alone, and we are typical”.