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Economy sheds most jobs since 2003, more cuts seen
WASHINGTON — Jobs are vanishing at the fastest pace in more than five years with pink slips likely to keep stacking higher in the months ahead, an urgent signal the country may be careening toward a deep and painful recession just as Americans prepare to elect a new president.
Whether that's Democrat Barack Obama or Republican John McCain, one of them will be dealing with the weakest employment climate in years.
Increasingly skittish employers dropped the ax even harder in September, chopping payrolls by 159,000 _ more than double the cuts made just one month before. It was the ninth straight month of job losses. A staggering 760,000 jobs have disappeared so far this year.
The Labor Department's report, released Friday, also showed that the nation's unemployment rate was 6.1 percent, up sharply from 4.7 percent a year ago. Over the last year, the number of unemployed people has risen by 2.2 million to 9.5 million.
"Washington, the labor market has a problem," said Joel Naroff, president of Naroff Economic Advisors. "Firms are hunkering down and running as lean as possible. ... We are likely to see more months of job losses before conditions turn around."
The unemployment rate for blacks shot up to 11.4 percent, the highest since late 2003.
Even with Congress' unprecedented $700 billion financial bailout, the faltering economy and the jobs market probably will get worse. Many believe the economy will jolt into reverse later this year _ if it hasn't already_ and will stay sickly well into next year.
The unemployment rate could hit 7 or 7.5 percent by late 2009. If that happens, it would mark the highest since after the 1990-91 recession. Some economists say the jobless rate could rise even more before the situation starts to get better.
Pressure is growing on Federal Reserve Chairman Ben Bernanke to do an about-face and lower a key interest rate in a bid to revive the economy. Many now think that will happen at the Fed's next meeting on Oct. 28-29 or even earlier.
The hope riding on such a move would be to spur nervous consumers and businesses to spend more freely again. They've clamped down as housing, credit and financial problems intensified last month, throwing Wall Street into chaos.
On Wall Street, the Dow Jones industrials slid 157.47 points after relief over the bailout plan's passage gave way to worries about the economy.
Friday's employment snapshot is the last before America goes to the polls in November.
Mounting job losses, shrinking paychecks, shriveling nest eggs and rising foreclosures all have weighed heavily on American voters.
The economy is their No. 1 concern. An Associated Press-GfK poll earlier this week showed that likely voters now back Obama 48 percent to McCain's 41 percent. They believe Obama is better suited to lead the country through the financial turbulence.
"I will rebuild the middle class and create millions of new jobs by investing in infrastructure and renewable energy," vowed Obama.
McCain pledged to "open markets around the globe for our products, cut taxes and expand domestic production of energy ... I will create jobs and get the economy on the right track."
White House spokesman Tony Fratto called the latest employment figures disappointing "but not unexpected given the shocks to the economy."
The 159,000 tally of total job losses _ government and private payrolls _ was the most since March 2003, when the labor market was still struggling to get back on its feet after being knocked down by the 2001 recession. Given a small net gain in government employment, the picture was particularly dark for private employers. They cut 168,000 jobs last month, the 10th month of such losses.
The pink slips were widespread.
Manufacturers (especially auto makers), home builders, retailers, securities and investment firms, hotels and motels, accountants and bookkeepers, architects and engineers, and legal services all cut back. So did temporary help firms _ usually a barometer of future hiring. That overwhelmed employment gains by the government, in education, health care and elsewhere.
Cost-cutting employers are getting rid of workers as companies chafe under all the economy's problems. Companies announcing layoffs in September included Hanesbrands Inc., Hewlett-Packard Co., Schering-Plough Corp., Alaska Airlines and Alcoa Inc.
Spooked consumers and businesses have pulled back so much that some analysts fear the economy could stall out _ or even worse _ shrink in the July-to-September quarter. Many predict the economy will contract in both the final quarter of this year and the first quarter of next year, meeting the classic definition of a recession.
"The economy was on the way down even before the latest tightening in the credit crunch," said Nigel Gault, economist at Global Insight.
Wage growth for workers is slowing, meaning they'll be more hard-pressed to spend and help the ailing economy.
Average hourly earnings rose to $18.17 in September, a 0.2 percent increase. That was half the pace logged in the previous month. Over the past year, wages have grown 3.4 percent, but paychecks aren't stretching as far because of high food and energy prices.
Strains on Americans were sorely evident. The number of consumer bankruptcy filings rose about 29 percent in September from a year ago, the American Bankruptcy Institute reported Friday.
The financial crisis that intensified in September is forcing a seismic shake-up on Wall Street.
Lehman Brothers, the country's fourth-largest investment bank, filed for bankruptcy protection. A weakened Merrill Lynch, deciding it couldn't go it alone anymore, found help in the arms of Bank of America. AIG was thrown a financial lifeline. And, the last two investment houses _ Goldman Sachs and Morgan Stanley _ decided to convert themselves into commercial banks to better weather the financial storms. The number of banks that have failed this year are up sharply from last year. On Friday, Wachovia Corp. said it will be acquired by Wells Fargo & Co. wiping out Wachovia's previous plan to sell its banking operations to rival suitor Citigroup Inc.
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JEANNINE AVERSA | October 3, 2008 10:10 PM EST |
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