6 Dec 2008

US job losses reach 34-year high

7:19 pm on 6 December 2008

More than half a million people in the United States lost their jobs in November - the worst monthly drop in employment since 1974.

The loss of 533,000 jobs has forced the unemployment rate up to a 15-year high of 6.7%, from 6.5% in October, fuelling fears that the world's biggest economy is set for a long, deep downturn.

Some 10.3 million Americans are now out of work and even more job losses have been announced since the latest numbers were compiled.

The news pushed Wall Street share prices down 2.5% at one stage, but the market then rebounded and eventually closed up 3%.

US oil prices fell to a four-year low, before recovering slightly to close down $US1.93 at $US41.74 a barrel.

Bush acknowledges recession

Four days after the government officially stated that the US economy was in a recession, President George Bush himself publicly acknowledged the fact.

Speaking at the White House, Mr Bush said: "Our economy is in a recession. This is in large part because of severe problems in our housing, credit and financial markets."

Reacting to the unemployment data, US President-elect Barack Obama has called for urgent measures to stimulate the American economy and get people back to work.

At the same time he warned the worst is yet to come.

"There are no quick or easy fixes to this crisis, which has been many years in the making, and it's likely to get worse before it gets better."

Economy "in free fall"

Commentators said the jobs figures clearly show how steeply the US economy is declining.

"This was much worse than was expected and represents wholesale capitulation. The threat of a widespread depression is now real and present," said Peter Morici, a professor at the University of Maryland School of Business.

The National Bureau of Economic Research said earlier in the week that the US entered a recession in December 2007.

Separately, a measure of US service sector activity, the Institute for Supply Management's index, dropped to a record low in November.

The US service sector makes up about 80% of US economic activity.

November was the 11th month in a row that the economy lost jobs.

"In the past six months the US has lost 1.55 million jobs, almost as many as were lost in the whole 2001 recession," said Ian Shepherdson at High Frequency Economics.

Richard Yamarone at Argus Research in New York, says: "You can't get much uglier than this. The economy has just collapsed, and has gone into a free fall."

Outlook bleak

The economy contracted at an annual rate of 0.5% from July to September due to the biggest fall in US consumer spending in 28 years.

Many economists believe the gross domestic product will fall even more sharply in the current quarter.

Earlier in the week, the Federal Reserve Board painted a bleak picture of the US economy in its influential Beige Book, a report used to help determine US interest rates.

It said economic activity has weakened across the US in the past two months, with retail sales, and vehicle sales in particular, "down significantly".

US companies such as AT&T, DuPont, JPMorgan Chase and mining company Freeport-McMoRan Copper & Gold have announced job cuts this month.

Analysts fear the trend will worsen further.

Agreement with car makers close

Meanwhile Democratic Party politicians have reportedly reached agreement with the White House on emergency aid for US automakers.

Senior congressional aides say the package comprises $US28 and $US32 billion - far less than the $US65bn requested this week by General Motors, Ford Motors and Chrysler, but it would keep them going into next year.

A vote is expected next week on an assistance plan.

Congress and the White House are anxious to prevent the threatened collapse of one or more of the major car companies, which directly employ 250,000 people.