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Nov 14, 2008

U.S. Jobless Rate Hits 14-Year High

In a sign that American workers may face even more difficult times for many months to come, the nation’s unemployment rate last month jumped to the highest level in 14 years as job losses mounted.

Gloomy enough was word from the government on Friday that a fresh 240,000 American jobs disappeared in October, the 10th consecutive month of retrenchment. It brought the toll of lost jobs to 1.2 million for the year — more than half in the last three months alone — while the unemployment rate climbed to 6.5 percent. Worse was the sense that little could be done near term to alter this now-accelerating trajectory.

President-elect Barack Obama, speaking at his first news conference since winning Tuesday’s election, sounded resigned to inheriting a starkly troubled economy when he moves into the White House next year.

“It’s not going to be quick, and it’s not going to be easy to dig ourselves out of the hole that we’re in,” Mr. Obama said, calling for swift passage of spending measures aimed at stimulating the economy, including another extension of unemployment benefits.

But while experts said this could soften the damage, it was unlikely to change the fundamentals. They said the economy would probably lose several hundred thousand jobs a month well into next year, taking the unemployment rate to near 8 percent — a level last seen a quarter-century ago.

“The economy is slipping deeper into a recessionary sinkhole that is getting broader,” said Stuart G. Hoffman, chief economist at PNC Financial Services Group in Pittsburgh. “The layoffs are getting larger, and coming faster.”

The health care industry, mining and public schools were the only sectors that showed more than modest growth last month. Otherwise, losses were deep and broad. Manufacturing jobs shrank by 90,000, construction by 49,000, retail by 38,000 and the financial industry by 24,000.

The outlook is troubling in part because a new atmosphere of tightness in American banking could prevail for years, say analysts, crimping economic growth. Economists tend to think in terms of a natural cycle of commerce, with businesses investing aggressively when money is abundant, pulling back when times are lean, then jumping back in when fresh opportunities emerge. This time the money may be particularly slow to return.

The worst of the financial crisis seems to have been tamed, staving off the prospect of a cataclysm, but the underlying reality endures: after two decades in which economic growth has been powered by extraordinary surges of borrowed money — a time of entrepreneurial machismo — a new era of risk-avoidance appears at hand.

In Washington, and in capitals on multiple continents, governments are devising new regulatory approaches for banks aimed at reining in the sorts of reckless engineering that made capital abundant before bringing the global financial system to grave peril. Whatever the rules, surviving banks seem likely to operate conservatively.

“The economy’s long-term, underlying growth prospects have been reduced, not forever but maybe for five or 10 years,” said Mark M. Zandi, chief economist at Moody’s “We’re just not going to see the same sort of entrepreneurial spirit needed to generate those strong productivity gains. People have been so chastened, and they’re so fearful, that they are going to take too few risks for quite some time before the psyche is healed.”

The number of unemployed Americans leapt in October to 10.1 million — the largest number since 1983. More than 22 percent of all unemployed people have been out of work for six months or longer — another level not reached in a quarter-century.

Only 32 percent of all unemployed people were drawing state benefit checks in October because of restrictions on eligibility. More than half of all unemployed people drew benefits in the 1950s, and about 45 percent received state checks during the last recession in 2001.

“It’s a national shame,” said Andrew Stettner, deputy director of the National Employment Law Project in New York, which has been advocating an extension of unemployment benefits. “We need to be helping these families avert financial disaster, and help make up for the loss of consumer demand, and the best way we can do that is to get people unemployment checks.”

Source : NYTimes
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