The economy lost nearly 600,000 jobs in January for the third month in a row, driving the nation’s unemployment rate up to 7.6 percent, the Labor Department reported Friday.
No one was spared as the latest job losses affected nearly every sector of the economy and brought the number of jobs eliminated in the past three months to nearly 1.8 million. It was the economy’s worst three-month performance since 1945.
Since the recession began a year ago, a record 3.6 million jobs have disappeared.
“The economy went into a free-fall in September when the credit crisis flicked the economic ’off’ switch,” said Richard Yamarone, chief economist at Argus Research Corp. “Businesses were faced with no other choice but to slash their greatest cost and reduce staff.”
Manufacturers laid off a stunning 207,000 workers, idling auto plants and other factories as consumers stayed away from auto showrooms and export markets around the world sank deep into recession. It was manufacturing’s worst month since the severe recession of 1982.
Another 110,000 construction workers were laid off, bringing the total number of construction jobs lost in the past year to 1 million. Another casualty of the housing and financial crisis was employment in financial services, which fell by 42,000 and is down 388,000 in the past two years.
Retail took an expected drubbing after the worst Christmas shopping season in more than 40 years. About 45,000 retail jobs were cut. With consumers boycotting the malls, retailers have laid off nearly 600,000 people in the past year.
The only sectors that managed to eke out small job gains last month were government, education and health care.
Mr. Yamarone said the upheaval in the auto industry, which has driven much of the job losses not only at factories but also in retail showrooms, is probably unavoidable as the aging of the U.S. population means automakers will not be able to sell as many cars in the future and must permanently slash their work force.
“This death of the U.S. auto industry is taking an extreme toll on economic conditions,” he said.
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But the same aging of the baby boom that spells doom to manufacturers is helping to buoy the health care industry, which has been the only consistent creator of jobs throughout the recession, he said.
“There are more members in the boomer generation than in Gen-X and Gen-Y combined, and when they get older, they demand more medical attention,” Mr. Yamarone said.
The hemorrhaging of jobs caused unemployment to rise strongly among every group from white men to black teenagers. The run-up in unemployment from less than 5 percent at the start of the recession is the steepest since the 1970s and reflects the rapid-fire elimination of jobs in every sector. It has driven unemployment claims to record highs.
Bernard Baumohl, chief global economist at the Economic Outlook Group, called the huge job losses “horrific” and “shocking.”
“If the jobless rate maintains its pace of the last 12 months, we’ll see it cross into double digits a year from now,” he said, noting “it has already reached that point for African-Americans” and teenagers, whose unemployment rates are at 12.5 percent and 20.8 percent, respectively. Joblessness among Hispanics is approaching the 10 percent threshold at 9.7 percent.
“While the headline unemployment rate is 7.6 percent, that figure jumps to 13.9 percent when you add in all workers who gave up looking for a job plus those Americans who accepted part-time work because they were unable to locate suitable full-time employment,” he said.
The share of underemployed workers is the highest on record, he said.
But Mr. Baumohl actually saw some signs of hope in the dismal jobs report Friday. The number of people forced to accept part-time work actually declined slightly to 7.7 million from 7.9 million in January, while the rate of job losses in the critical service sector - which employs 70 percent of Americans - has slowed to 285,000 in January from 352,000 in November.
For people lucky enough to still have jobs, he noted, the gain in average wages has held up at 3.9 percent in the past year, while inflation has been plummeting. That means their purchasing power is rising briskly “and this can drive consumer spending higher in the future,” he said.
“Before we can even talk about a recovery, we first have to have evidence the downswing is decelerating,” he said. “We found a few tantalizing clues this may be under way.”
President Obama lamented the huge job losses in his first month in office as he pressed Congress to pass his $800 billion stimulus plan to try to re-create the jobs that have been lost.
“The problem is accelerating, not decelerating. It’s getting worse, not getting better,” Mr. Obama said as he announced a new economic advisory group of businessmen, union leaders and economists at the White House.
“These numbers demand action. It is time for Congress to act,” he said. “That’s 3.6 million Americans who need our help.”
Many economists agree that Congress must act to limit damage from the recession, but an increasing number also say it appears to be too late to prevent the worst from happening.
“The job news will increase the pressure on Congress and the administration to get a fiscal stimulus package passed,” said Nigel Gault, chief U.S. economist at IHS Global Insight. “Unfortunately, the downward momentum in the economy is so steep that it is hard to see how the package can kick in quickly enough to make much difference to 2009.”
Argus’ Mr. Yamarone said Congress should have acted last fall and it is too late to prevent the job bloodbath that is under way. While Democratic leaders in Congress wanted to pass a stimulus package in the fall, the Bush administration and many Republicans were opposed to the idea.
“Traditionally, at the first sign of economic deterioration, the government steps up its efforts and primes the pump with spending and tax-related initiatives,” Mr. Yamarone said. “Something should have been adopted about six months ago when joblessness skyrocketed. With this latest report we have begun to fear the worst: that the string of joblessness will carry through 2009, and intensify in magnitude.”
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