US economy bleeding jobs, unemployment at 5-year high
WASHINGTON (AFP) – The struggling US economy lost 159,000 jobs in September as the weight of the housing collapse and credit crunch hit a broad swath of industries, government data showed Friday.
The report, seen as one of the best indicators of economic momentum, showed a sharp rise in the number of cuts after 73,000 job losses in August.
"There is little doubt that the nation is in a recession, which will only deepen in coming months, as the financial crisis casts a pall on economic activity," said Sophia Koropeckyj at Economy.com.
"Moreover, it is highly likely that conditions will deteriorate further in coming months as the various financial service restructurings result in tens of thousands of job losses, the credit crunch freezes business expansions and construction, retail bankruptcies mean more layoffs."
The unemployment rate calculated by a separate survey of households held at 6.1 percent, a five-year high, the Labor Department said.
Payrolls have fallen by 760,000 so far this year as the world's biggest economy has been roiled by a massive collapse in housing that spread to the financial sector and led to global credit crunch.
"The credit crisis has moved into the mainstream economy," said Joel Naroff at Naroff Economic Advisors.
"Firms are hunkering down and running as lean as possible. With all the uncertainty over the potential for a steep recession and the inability to get credit, it is hardly surprising that businesses have decided to wait and see. We are likely to see more months of job losses before conditions turn around."
September was the ninth consecutive month of declining payrolls, according to the report. The average analyst forecast of loss was 105,000 jobs.
The report "is just the latest in a series of indicators showing that the economy was deteriorating rapidly as the third quarter progressed," said Nigel Gault, economist at Global Insight.
"A very weak employment report that further confirms our view that the economy is in recession and that the recession deepened in September," said John Ryding at RDQ Economics.
"The increase in unemployment would have been larger but for a 121,000 drop in the labor force."
The report came hours before US lawmakers gave final approval to 700-billion-dollar rescue plan for the financial system, which has been drowning in losses from the housing meltdown and hurt by a credit crunch.
The latest official data showed the economy expanded at a healthy 2.8 percent pace in the second quarter, but most analysts say the figure was misleading because of a surge in exports and the impact of a one-time government stimulus.
Over the month of September, employment continued to decline in manufacturing, construction, and retail trade, while some gains were seen in health care and mining.
The manufacturing sector lost 51,000 jobs over the month, bringing the decline in factory jobs to 442,000 over the past 12 months, the report said. About 18,000 jobs were lost last month in the auto sector, which has been reeling from weak consumer spending and confidence.
Some 35,000 jobs were lost in construction along with 40,000 in retail trade.
The troubled financial sector shed 17,000 jobs in September, with nearly half of the decline occurring in securities and investment firms. Overall, the report showed the financial sector has lost 172,000 jobs since December 2006.
The report showed average hourly earnings rose 0.2 percent to 18.17 dollars, slightly below the consensus estimate of a 0.3 percent rise.
The average workweek for fell by 0.1 hour to 33.6 hours, seasonally adjusted.
"Together this means incomes are going to be crimped that will feed back to weaken spending," said Robert Brusca at FAO Economics.
"And the will fed back into jobs. It is vicious circle time."
White House hopefuls Barack Obama and John McCain voiced concern at the latest US employment data, and clashed again over the best way to stop the rot.
Obama said the US "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."
McCain argued that "unlike Senator Obama, I do not believe we will create one single American job by increasing taxes, going on a massive spending binge, and closing off markets."