Labor Markets Unemployment Reaches 7.6%, Highest in 16 Years

WASHINGTON — - Spooked by the deteriorating economy, businesses are continuing to shed jobs at an alarming rate, pushing the unemployment rate to 7.6 percent, its highest level in 16 years.
The government Friday gave its latest damage report: 598,000 jobs lost in January, the largest number for any single month since 1974.
And job losses for November and December were much worse than previously estimated, the Labor Department said, likely reflecting layoffs at smaller companies that are slower to report their data.

"The recession has deepened, and we're in the worst part of it now," said Mickey Levy, chief economist at Bank of America in New York.
Some 3.6 million jobs have disappeared so far in this recession, which is shaping up as the biggest job killer in the post- World War II period.
Many economists expect the job losses to continue for months and the unemployment rate to reach 9 or 10 percent before improving.
And job seekers' prospects aren't likely to become noticeably better until 2011 — at the earliest — when job growth should return to a more healthy pace, analysts said.
Still, the stock market rallied, with the Dow Jones industrial average rising more than 200 points, as investors looked forward to Monday's expected announcement on President Barack Obama's plan for resuscitating the nation's banks and easing the housing crisis.

Financial stocks led the way up on hopes that Treasury Secretary Timothy Geithner will announce a comprehensive plan that could revive bank lending without having the government nationalize major institutions.

"Any good news — meaning there's anticipation of a well-thought-out solution for the financial system — is welcome," said Robert W. Bissell, president of Wells Capital Management in Los Angeles.
Investors also viewed the dreary unemployment numbers as ratcheting up pressure on lawmakers to speed the enactment of the long-awaited economic stimulus package.
Obama has said he is pursuing a three-pronged attack on the economic crisis. The first part is the $800 billion stimulus plan, which the president is pushing Congress to complete by the end of next week. The second part is the bank stabilization plan, and the third, a program to stem the tide of home foreclosures that triggered the economic downturn.
To address the housing crisis, the administration is expected to leverage the size and expertise of Fannie Mae and Freddie Mac — the mortgage giants now controlled directly by the federal government — to spur the refinancing of millions of troubled mortgages.

Lee Ohanian, a UCLA economist, said that the recession that began in December 2007 was relatively mild until the financial crisis accelerated in September and businesses lost confidence in the economy.
As a result, he said, it's critical that Geithner's plan restore confidence in the markets. And if it does, then Wall Street may be right that recovery is on the way.

"Geithner's proposal could be a key ingredient in a recovery," Ohanian said. "The stock market, more than anyone else, understands that we had a perfect storm of bad regulations and bad policies that led to this. And they understand better than anyone else that once we have the financial system addressed, we can start making progress."
Still, financial markets tend to be forward-looking and to rebound quickly. The labor market, on the other hand, tends to react more slowly, and job losses often continue well after stocks and other financial indicators improve.
Nigel Gault, chief U.S. economist for IHS Global Insight, an economic forecasting firm in Lexington, Mass., said he's "not as confident as the stock market is that things are going to get better any time soon."
The stimulus plan "will make things less bad, but that doesn't alter the fact that these numbers are bad and the downward momentum is severe," Gault said. "If we're bottoming, it's in the sense that the most severe rates of decline are what we're experiencing now."
Since the recession began, the economy has shed 3.6 million jobs, and the losses in the last two months of 2008 were even worse than previously reported. The Labor Department issued a revised tally on Friday indicating that December's job losses were 577,000, up from an estimated 527,000 and November's came in at 597,000 up from 584,000.

The pink slips are hitting all categories of workers — blue collar, white collar, those without high school diplomas and those with college degrees. And they're sparing few occupations or regions.
Connecticut lost 29,300 jobs in 2008, or nearly 2 percent of its total, about the same rate as the nation, preliminary reports showed. Unemployment stood at 7.1 percent in December. It has not yet been reported for January but all indications are that job losses accelerated here in the first month of the year. Experts forecast the state economy will lose as many as 60,000 more jobs in the next two years.

Around the country, economic setbacks have forced consumers to retrench, and those spending cutbacks have, in turn, led companies to pull back and slash jobs. As the cycle persists, the economy's problems are feeding on each other.
With no replacement work to be found, the ranks of unemployed workers climbed to 11.6 million. In addition, 7.8 million people were working part time. That category includes those who would like to work full time but whose hours were cut back or those who were unable to find full-time work.
The recession is likely to turn out to be the longest since the 1930s. The two record holders since then — downturns in the mid-1970s and early 1980s — each lasted 16 months. This recession, which would reach that milestone in April, probably won't end until September, Mark Zandi, chief economist at Moody's Economy.com, and other analysts said.
Some Americans have been hit harder than others. The unemployment rate for blacks jumped to 12.6 percent in January, a 15-year high. The rate for Hispanics climbed to 9.7 percent, the highest since 1995.
"The job market is unraveling," Zandi said. "Businesses are panicked. They are fighting for survival and slashing payrolls to conserve cash, and there's no sense this is going to stop any time soon."

An Associated Press report is included.

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