US job losses exceed September forecast

U.S. job losses unexpectedly accelerated last month and the unemployment rate reached the highest level since 1983, signaling any recovery in consumer spending and economic growth will be slow to develop.

The Labor Department figures prompted President Barack Obama to say he’s working to “explore any and all additional measures” to spur growth, and underscored forecasts for the Federal Reserve to keep its benchmark interest rate near zero through next year.

“This has the potential to put a big stop sign on the road to economic recovery,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “The harder jobs are to get, the harder and longer this road to recovery is going to be.”

Payrolls dropped by 263,000 in September, exceeding the median forecast in Bloomberg’s survey, with losses extending from cash-strapped state and local governments to retailers to builders, yesterday’s report showed. The jobless rate rose to 9.8 percent from 9.7 percent in August, while working hours matched a record low.

The Standard & Poor’s 500 Index closed down 0.5 percent at 1,025.21 in New York trading, losing 1.8 percent for the week. Ten-year Treasury yields rose to 3.22 percent late yesterday from 3.18 percent the prior day. The dollar sank 0.2 percent to 1.4576 per euro at 5:30 p.m. New York time.

Orders Fall
Obama called yesterday’s report a “sobering reminder that progress comes in fits and starts” in remarks at the White House after returning from Copenhagen, where he made an unsuccessful bid for Chicago to host the 2016 Olympic Games.

A Commerce Department report yesterday showed orders placed with factories fell unexpectedly in August, restrained by declines in demand for commercial aircraft and construction machinery. Bookings fell 0.8 percent after a revised 1.4 percent increase in July. Excluding transportation equipment, orders rose 0.4 percent.

Fed Chairman Ben S. Bernanke this week said economic growth may not be strong enough to “substantially” bring down unemployment, indicating the central bank will be slow to drain the trillions of dollars it’s pumped into the economy. UAL Corp. is among companies cutting jobs on concern spending will fade as government stimulus wanes.

Fed Bank of Boston President Eric Rosengren said the central bank and government should maintain policies to support economic growth and bring down unemployment until a self- sustaining recovery is assured.

‘Elevated Unemployment’
“I’d like policy to try to stimulate the labor markets as much as possible,” Rosengren said in response to questions following a speech in Boston yesterday. “But the reality is even with stimulated labor markets, we’re likely to see elevated unemployment for the next couple of years.”

September’s figures brought total jobs lost since the recession began in December 2007 to 7.2 million, the biggest decline since the Great Depression.

Payrolls were expected to drop 175,000, the median of 84 estimates in a Bloomberg News survey of economists. Job losses peaked at 741,000 in January, the most since 1949.

The bigger-than-forecast decline in September and the jump in the jobless rate are “disappointing,” Christina Romer, Obama’s chief economist, said yesterday in a Bloomberg Television interview. Even so, Romer said the administration was focusing on the overall trend of slowing job losses, which showed “we’re moving in a good direction.”

Yesterday’s report showed factory payrolls fell 51,000 after decreasing 66,000 in the prior month. The decline included a drop of 3,500 jobs in auto manufacturing and parts industries.

GM, Saturn
General Motors Co. this week said it would close the Saturn brand after Penske Automotive Group Inc. broke off discussions to buy the unit. Saturn dealers will have until October 2010 to wind down operations. The Detroit-based automaker said in June a Saturn sale would have saved 13,000 jobs and 350 dealerships.

GM had called back some workers after the government’s “cash-for-clunkers” plan cut further into inventories already diminished during the bankruptcy shutdown.

Payrolls at builders dropped 64,000 after decreasing 60,000. Financial firms decreased payrolls by 10,000, after a 25,000 decline the prior month.

Broad-Based Losses
Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 147,000 workers after falling 69,000. Retail payrolls declined by 38,500. Government payrolls decreased by 53,000.

Economists surveyed by Bloomberg last month projected the jobless rate will reach 10 percent by late 2009 and average 9.7 percent for all of next year even as the economy expands at an average 2.6 percent pace in the second half of this year and 2.4 percent in 2010.

Yesterday’s report also showed companies cut working hours, pushing weekly earnings lower.
The average work week shrank to 33 hours in September, matching a record low, while average weekly earnings fell to $616.11.

Workers’ average hourly earnings were 2.5 percent higher than September 2008, the smallest gain since 2005.

Source: Bloomberg