More grim news on jobs as signs point to deeper recession
Kevin G. Hall
New economic reports this week suggest that the Labor Department will report dismal jobs numbers Friday as U.S. employers continue shedding jobs at a blistering pace and the number of Americans filing for unemployment benefits rises.
Economists expect the Bureau of Labor Statistics to report that at least 500,000 jobs disappeared in December, in what's sure to be a sign that the contraction in world's largest economy is deepening.
That would bring the total number of jobs lost from December 2007 to December 2008 to almost 2.5 million — the steepest first-year loss of jobs in a recession since the Great Depression.
Adding to expectations of grim news, the Labor Department reported Thursday that first applications for unemployment insurance benefits totaled 467,000 in the week that ended Jan. 3.
That's down 24,000, the second week in a row that claims have fallen, but the drops are thought to be due to holiday-shortened workweeks, not any economic improvement.
"Despite consecutive weeks of declines in initial claims, it is hard to argue that the labor market is improving," Gary Bigg, an economist with Bank of America in New York, said in a note Thursday to investors. "In addition, the auto plant shutdowns are looming. We expect this downtrend in initial claims will be short-lived."
The four-week average for new unemployment claims suggests that 525,750 more Americans filed their first claims for unemployment benefits. That's a slight improvement, but hardly worth cheering about.
"We still look for a 600,000 drop in December payrolls and for a 7 percent unemployment rate," RDQ Economics predicted in a note to investors.
One reason for such gloomy forecasts was the Wednesday release of payroll manager ADP's employment index, a gauge of payroll activity in the private sector. It showed that a bigger-than-expected 693,000 private-sector jobs were lost in December, in businesses of all sizes.
"Large businesses, defined as those with 500 or more workers, saw employment decline 91,000, while medium-size businesses with between 50 and 499 workers declined 321,000. Employment among small-size businesses, defined as those with fewer than 50 workers, declined 281,000," the ADP report said. "Sharply falling employment at medium- and small-size businesses clearly indicates that the recession has now spread well beyond manufacturing and housing-related activities."
Adding to the sense of gloom, the Labor Department also reported on Thursday that the number of Americans continuing to file claims for unemployment benefits jumped by a surprising 101,000 workers to 4.61 million. This means that laid-off workers aren't finding jobs.
The stimulus package being drawn up by the newly seated 111th Congress and President-elect Barack Obama includes an extension of unemployment benefits and perhaps some measure of benefit to the swelling number of part-time workers.
Rising unemployment feeds a vicious circle: The more people who are out of work, the less consumption there is, and that's a body blow to the economy, since consumer spending drives about two-thirds of U.S. economic activity.
As consumption falls, consumer confidence falls.
That was evident on Thursday as retailers reported plunging same-store sales for December despite the holidays. Wal-Mart confirmed Thursday that its December sales missed analysts' expectations and that it was revising downward its fourth-quarter earnings forecast. Wal-Mart's stock closed off 7.5 percent on the news.
ON THE WEB