01 Feb 2009
Feb. 1 (Bloomberg) -- The jobless rate in the U.S. probably jumped in January to the highest level in 16 years as slumping sales forced employers to slash staff, economists project reports this week will show.
Unemployment climbed to 7.5 percent, and payrolls fell by 530,000, the 13th consecutive decrease, according to the median estimate in a Bloomberg News survey ahead of Labor Department figures Feb. 6. Other reports may show manufacturing, services and housing shrank further, signaling more firings ahead.
Plunging demand and frozen credit are causing companies from Caterpillar Inc. to General Motors Corp. to pare jobs and output to prevent unsold goods from piling up. Concern that the recession will deepen after the economy contracted at the fastest pace in 26 years last quarter is prompting President Barack Obama to push for quick passage of his stimulus plan.
"The labor market will look terrible for a while," said Sung Won Sohn, a professor of economics and finance at California State University Channel Islands, in Camarillo, California. "If the downward momentum is not arrested, the consequences could be disastrous. Policy makers need to act quickly."
The jobless rate in December reached 7.2 percent. Employers cut 524,000 workers from payrolls that month, bringing total job losses in 2008 to 2.6 million, the most since 1945.
This week's report may also show manufacturers cut 143,000 jobs following a reduction of 149,000 in December that was the biggest since 2001, according to the Bloomberg survey.
Factory Slump
The Institute for Supply Management's factory index, due tomorrow, fell to 32.5 in January, the lowest level since 1980, from a reading of 32.9 the prior month, according to the survey median. A reading of 50 is the dividing line between growth and contraction.
The Tempe, Arizona-based group's gauge for service industries, which make up about 90 percent of the economy, probably fell to 39 from 40.1. That report is due Feb. 4.
Caterpillar, the world's largest maker of bulldozers and excavators, said on Jan. 30 that it will dismiss 2,110 factory workers, adding to the 20,000 job losses it announced on Jan. 26.
"Depending on business conditions, more layoffs and separations may be required as the year unfolds," the Peoria, Illinois-based company said in a statement.
Businesses also are slashing spending on new equipment. Factory orders fell 3 percent in December, the fifth consecutive decline, economists forecast ahead of a Commerce Department report Feb. 5.
Auto Cutbacks
Automakers including GM, Chrysler LLC, Ford Motor Co. and Toyota Motor Corp. are scaling back North American output. GM, which already closed most of its 22 plants in North America in January, said it'll eliminate shifts in the second quarter at plants in Ohio and Michigan and cut about 2,000 jobs.
The economy contracted at a 3.8 percent annual rate last quarter as consumer spending continued to slide. The slump caused unsold goods to pile up, indicating more cutbacks are in the offing.
The economy is "a continuing disaster" for families, Obama said on Jan. 30 as he signed executive orders to strengthen unions and put Vice President Joe Biden in charge of a task force on the middle class.
"The recession is deepening and the urgency of our economic crisis is growing," said Obama, who is pressing to boost spending on infrastructure projects and lower taxes to create and save jobs. The House passed an $819 billion stimulus plan last week, shifting attention to the Senate.
Fed Action
The Federal Reserve last week left the benchmark interest rate as low as zero and said it was prepared to expand steps to revive lending. Policy makers also warned that inflation may recede too quickly and that downside risks to growth "are significant."
One major drag is housing, now in its fourth year of a slump as home values fall and foreclosures surge. The National Association of Realtors' index of pending home sales was unchanged in December following a string of three consecutive declines, according to the median forecast ahead of a report due Feb. 3.
A day earlier, Commerce figures may show spending on construction projects fell for the third consecutive month, economists said.
Also on Feb. 2, Commerce may report consumer spending dropped in December and incomes also declined as the job market deteriorated.
Bloomberg Survey
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Release Period Prior Median
Indicator Date Value Forecast
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Pers Inc MOM% 2/2 Dec. -0.2% -0.4%
Pers Spend MOM% 2/2 Dec. -0.6% -0.9%
PCE Deflator YOY% 2/2 Dec. 1.4% 1.0%
Core PCE Prices MOM% 2/2 Dec. 0.0% 0.0%
Core PCE Prices YOY% 2/2 Dec. 1.9% 1.7%
ISM Manu Index 2/2 Jan. 32.9 32.5
ISM Prices Index 2/2 Jan. 18.0 18.0
Construct Spending MOM% 2/2 Dec. -0.6% -1.2%
Pending Homes MOM% 2/3 Dec. -4.0% 0.0%
ADP Payroll ,000's 2/4 Jan. -693 -530
ISM NonManu Index 2/4 Jan. 40.1 39.0
Productivity QOQ% 2/5 4Q 1.3% 1.2%
Labor Costs QOQ% 2/5 4Q P 2.8% 3.0%
Initial Claims ,000's 2/5 Jan. 31 588 580
Cont. Claims ,000's 2/5 Jan. 24 4776 4790
Factory Orders MOM% 2/5 Dec. -4.6% -3.0%
Nonfarm Payrolls ,000's 2/6 Jan. -524 -530
Unemploy Rate % 2/6 Jan. 7.2% 7.5%
Manu Payrolls ,000's 2/6 Jan. -149 -143
Hourly Earnings MOM% 2/6 Jan. 0.3% 0.2%
Hourly Earnings YOY% 2/6 Jan. 3.7% 3.6%
Avg Weekly Hours 2/6 Jan. 33.3 33.3
Cons. Credit $ Blns 2/6 Dec. -7.9 -4.0
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