Sinking feeling as fall in jobs spreads wider
By James Politi
JPMorgan economists have compared the US labour market with a boat sailing through rough seas over the past few months. The July data showed it "was taking on more water, but has not yet capsized". By August, the boat had indeed capsized, and in September there were "159,000 men and women overboard", according to figures released at the end of last week.
Last month's decline in non-farm payrolls was the largest since March 2003, and one of the clearest signs yet that turmoil on Wall Street and the US banking industry is spilling over into the broader economy: manufacturers cut 51,000 jobs; retailers shed 40,000; construction companies lost 35,000; and financial services groups slashed 17,000.
"The composition of the report doesn't give much comfort. Just about every sector lost jobs," said Goldman Sachs, which is expecting the US unemployment rate to increase from its current 6.1 per cent to 8 per cent by the end of next year. Before Friday its projection was that the unemployment rate would peak at 7 per cent during this cycle.
There are a few caveats, however. Although the US economy has lost jobs every month so far this year - a total of 760,000 since January - the rate at which positions are being shed remains slower than the pace of more than 200,000 monthly reductions seen in previous recessions. The September data came closer to that threshold, but did not cross it.
In addition, there was one notable distortion caused by hurricane Gustav, which affected coastal Louisiana last month, causing employers in the region to scale back their operations.
Nevertheless, many economists fear that the pace of job losses could increase further in October, especially as the full impact of the deepening financial crisis is felt in large and small companies across the US. Other one-time factors could also lead to a higher tally this month, such as the strike of 27,000 workers at Boeing and hurricane Ike, which hit Texas in mid-September but whose effect will be registered in October payrolls.
Beyond an accelerating pace of job losses, the non-farm payroll report also exposed worsening conditions for workers who are still employed. The average work week declined to 33.6 hours from 33.7 hours between August and September and the index of private sector hours worked dropped by 0.5 per cent - the largest monthly fall since 2003.
Meanwhile, the pace of workers' hourly earnings growth slowed from 0.4 per cent to 0.2 per cent - the slowest since April. To cap it off, the Department of Labor said that 337,000 Americans began working part time because they were unable to find full-time jobs. That category has swelled by 1.6m during the past 12 months to just over 6m people.