Employment has diminished for nine consecutive months, eliminating 760,000 jobs, according to the Labor Department’s report. And that does not count the traumatic events of recent weeks, as a string of Wall Street institutions collapsed, prompting the $700 billion emergency rescue package approved by Congress on Friday.
“It’s a dismal report, and the worst thing about it is that it does not reflect the recent seizure that we’ve seen in the credit markets,” said Michael T. Darda, chief economist at MKM Partners, a research and trading firm in Greenwich, Conn. “There’s really nothing good about this report at all. We’ve lost jobs in nearly every area of the economy, and this is going to get worse before it gets better because the credit markets have deteriorated basically on a daily basis for the last few weeks.”
Though the bailout may restore order to the financial system and eventually filter through the economy by making it easier for businesses to secure capital, few analysts expect it to swiftly reverse the nation’s fortunes. Housing prices continue to fall, eroding household wealth just as millions suffer the weight of unmanageable debt. The deteriorating job market has taken paychecks out of the economy, reinforcing a predilection for thrift that has cut sales from car showrooms to hair salons.
Banks should see their balance sheets improve as the government relieves them of disastrous investments, yet they may remain skittish and reluctant to lend.
“At best, the bailout stops a much deeper decline in activity,” Mr. Darda said, “but it’s not like they’re going to do this and all of the sudden the clouds part and the skies are clear.”
Only a few weeks ago, many economists still held hopes that the economy might recover late this year or early next. But with the job market now contracting faster, and fear dogging the financial system, the broad assumption has taken hold that 2008 is a lost cause.
Most economists have concluded that the economy will struggle well into next year. More pessimistic forecasts envision the economy remaining weak through most or all of next year.
“This is an economy in recession, and every dimension of the report confirms that,” said Ethan S. Harris, an economist at Barclays Capital. “This has been preceded by a slow-motion recession. Now we’re going into the full-speed recession that will last somewhere between three and five quarters.”
For the first eight months of the year, the economy lost an average of 75,000 jobs each month. September’s report more than doubled the pace.
“A lot of companies came to the realization that there was no momentum in the economy to pick them up in the second half of 2008,” said Steve Drexel, chief executive of Corestaff Services, a staffing company in Houston. “They had been hanging on to people and hoping things would improve, but now a lot companies are just sort of retrenching.”
The unemployment rate remained steady at 6.1 percent in September, but economists said that reflected how people who had given up looking for work were not counted. Over the last year, the unemployment rolls have swelled by 2.2 million, to 9.5 million. On Friday, Goldman Sachs forecast that the jobless rate would reach 8 percent by the end of next year, which would be the highest in 25 years.
In Charlotte, Mich., Sean Schwartz, 26, has been out of a job for nearly two months since his last stint as a construction worker. His $750-a-week paycheck has been replaced by a $620.10 unemployment check every other week.
Mr. Schwartz and his wife — who works at Wal-Mart — have a 2-year-old daughter and are expecting a baby in December. His job search has turned up little beyond fast-food jobs at a fraction of his previous earnings. Mr. Schwartz is becoming anxious.
“We’re not getting the bills paid,” he said, estimating that his family is behind $5,000 on medical bills for his daughter and his wife’s prenatal care. “It’s rough. There’s nothing really out there.”
As the impact of Wall Street’s distress ripples out, economists expect opportunities to grow leaner still. On Friday morning, banks needing to borrow from other banks were paying nearly 4 percent more in interest than the Treasury offers on savings bonds — a spread reflecting a general unwillingness to part with cash. That spread was wider than after the 1987 stock market crash.
Source : NYTimes
[tags : recession bankrupt collapse retrenchment financial news collapse stagnation economic]
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