There should now be no doubting the depth of the approaching US recession.
Friday’s employment data suggests that could be a little light on: in short it was the most horrific report in years.
Goldman Sachs economists said Friday they saw economic growth this quarter contracting by 3.5%, a bigger figure than any other forecast so far.
240,000 went from US payrolls last month and the jobless rate shot up to a 14-year high of 6.5%, topping the rate in the 2001 recession.
But more worryingly, job losses in September and August were deeper than previously thought.
The economy shed 284,000 jobs in September, the most since November 2001 and 127,000 went in August. That meant 179,000 more jobs were cut in August and September than previously thought. September’s forecast initially was a horrid 159,999, the worst so far this year. It remains that, but there’s every chance October’s figure will be revised again in coming months.
So far this year 1.2 million jobs have been lost, 651,000 in the past three months alone,
That’s far worse than we saw in the September report when the loss was just over 700,000 for the first 9 months of the year.
Now another 400,000 more jobs have vanished as the Government statisticians rework their reports and data collections.
It makes a mockery of fears in this country about unemployment reaching 5.75% to 6% or more by 2010. The US is already there and losing thousands of jobs a day.
Our rate of 4.3% was unchanged in October and even if the new series is cheaper and less accurate than the old one pre-July, the point is that unemployment in most major economies will end up far worse in this slowdown than we will experience here, tough as it will be for many in Australia.
For months the manufacturing sector was thought to have remained a pocket of strength, thanks to solid exports.
No longer: it’s crumbling, losing 90,000 jobs in October alone. That was after 56,000 jobs were shed in the sector in September.
The ending of the strike at Boeing last week though, will take more than 20,000 of those October jobless back into the employment column next month, but other job cuts will offset that gain.
Economists are now starting to forecast that the credit crunch and falling home prices will push the unemployment rate past the 7.8% high in the mid 1990s slump.
Goldman Sachs said in its update on Friday that the unemployment rate would hit 8.5% in 2009.
And, besides forecasting a sharp contraction this quarter, Goldman said the first quarter of 2009 would see growth shrink 2%.
Brokers said that bank, JPMorgan Chase, warned Friday that it would see a sharp rise in losses in its consumer business due to the worsening economic conditions.
The bank warned in a regulatory filing that US consumers’ financial health was threatened by ”rising unemployment, the continued downward pressure on housing prices and the elevated national inventory of unsold homes”.
The figures were much worse than the Wall Street forecast: economists had expected a loss of 200,000 nonfarm jobs in October and a jobless rate of 6.3% from 6.1% in September.
Service-producing industries dropped 108,000 jobs in October on top of 201,000 lost in September. Retailing lost close to 40,000 jobs.
Construction again lost jobs, 49,000 more jobs last month after 35,000 in September.
