Jobs: Worst in 5 years
Payrolls shrink by 159,000 - 9th straight month of cuts. '08 total: 760,000.
NEW YORK (CNNMoney.com) -- Employers made deeper cuts in their payrolls in September, according to the Labor Department's monthly jobs report, as the economy experienced the biggest drop in jobs in more than five years.
There was a net loss of 159,000 jobs in September, the ninth straight month the U.S. economy has lost jobs. The August job loss was revised to 73,000 jobs, taking year-to-date job losses to 760,000.
"This marks a clear downshift in the economy," said Robert Dye, senior economist with PNC Financial Services Group.
He pointed out that the September job loss is roughly twice the 75,000 average level seen in the first eight months of the year. The September jobs report loss, coupled with other recent economic readings and the credit crisis among the nation's banks and Wall Street firms, all point to deeper job cuts and recession conditions at least through the spring of 2009, he said.
The unemployment rate remained at 6.1%, the same level as August and in line with economists' forecast.
Economists surveyed by Briefing.com had forecast the loss of 105,000 jobs in the month. It was the largest monthly job loss total since March 2003, when payrolls were down 212,000, and the second-largest decline since the months that followed the Sept. 11 terrorist attack in late 2001.
Job losses were again widespread. Manufacturing lost 51,000 jobs while construction employment shrank further by 35,000 jobs. But retailers also trimmed payrolls by 40,000 workers, and the leisure and hospitality industries cut 17,000 jobs.
Professional and business services, a catch-all category seen by some as a proxy for overall economic activity, had a 27,000 drop in employment.
The only two major sectors to post gains were government, which added 9,000 jobs, and education and health services, in which employment grew by 25,000. Government hiring has stayed strong throughout the downturn, as the private sector has now lost nearly a million jobs since December, when employers started cutting back.
But even at many government offices, payrolls are shrinking as the slowing economy and rising fuel prices earlier in the year led to budget cuts. State and local governments cut 18,000 jobs in the month, outside of education. The gains in the public sector jobs came at schools and state colleges, as well as the federal government, which added nearly 7,000 jobs.
In another sign of weakness, the average hourly work week slipped by 0.1 hour to 33.6 hours. And a modest 3-cent gain in the average hourly salary, combined with the shorter week, means that the average weekly paycheck fell by 81 cents to $610.51. Both the work week and hourly wage gains were weaker than forecasts.
"Incomes being crimped will feed back to weaken spending. And that will feed back into more job losses," said Robert Brusca of FAO Economics. "It is vicious circle time."
The combination of the smaller payrolls and the shorter work week means that the total hours worked by all private sector employees declined for the sixth straight month.
John Silvia, chief economist of Wachovia, said that's another sign of a recession because fewer total hours on the job generally means lower output. But he said the declining hours and wages could open the door for the Federal Reserve to cut interest rates later this year, perhaps as soon as its Oct. 28-29 meeting. Other economists say a cut could even come before the next meeting. PNC's Dye said he's looking for at least a half-percentage point cut by the end of the month.
"At this point, if we're going off a cliff, a (quarter-percentage) point cut doesn't seem to be worth doing," he said.
While the unemployment rate did not increase, other measures of the number of workers without the jobs they wanted rose. Those working part-time jobs because they couldn't find full-time work or their hours had been cut back due to slack conditions jumped by 337,000 people to 6.1 million.
The so-called under-employment rate, which counts those part-time workers, as well as those without jobs who have become discouraged and stopped looking for work, rose to 11% from from 10.7%. That's the highest rate in that measure since April 1994.
And as bad as the government report was for those seeking work, there are worries among economists that worse readings lay ahead.
The report is based on surveys of employers and households conducted in the week of Sept. 8 to 12, a period before the worst of the current financial crisis hit Wall Street. That crisis caused banks to hoard cash and cut back on credit extended to businesses.
Fears that the credit crunch will cause widespread job losses and a severe downturn in the already struggling economy prompted Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke to push for a $700 billion Wall Street bailout.
The measure, which passed the Senate Wednesday night, was passed by the House on Friday, after a similar measure failed there on Monday.
Economists agree that even if the measure passes, it's very possible the future employment reports will show an even greater loss of jobs due to the credit crunch this month.
"The job losses are accelerating and the credit crunch is adding fuel to the fire," said Sung Won Sohn, an economics professor at Cal State University Channel Islands. "This recession could be deeper and longer than expected."
This is the last employment report before the Nov. 4 election. Both presidential candidates said the report is a sign that the U.S. worker needs help, but both claimed they have the proper solution while their opponent's policies would add to the job losses.
Republican John McCain argued that government budget and tax cuts, greater domestic energy production and more free trade agreements are the key to producing more jobs.
"I do not believe we will create one single American job by increasing taxes, going on a massive spending binge, and closing off markets," he said in a statement.
Democrat Barack Obama said it is necessary for Congress to pass a new economic stimulus package to help local and state governments avoid budget cuts and provide immediate tax relief for middle class workers.
"This country can't afford Senator McCain's plan to give America four more years of the same policies that have devastated our middle-class and our economy for the last eight," he said in his statement.
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