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| Surging US jobless rate puts pressure on Obama |
| Bloomberg / Washington Mar 09, 2009, 00:11 IST |
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The jump in the US unemployment rate to the highest level in a quarter century last month suggests the recession is deeper than the Obama administration forecasts and additional measures may be needed to restart growth.
The jobless rate rose to 8.1 per cent in February as employers reduced payrolls by 651,000, the Labor Department said on Saturday in Washington. Losses have now exceeded 600,000 for three straight months, the first time that’s happened since collection of the data began in 1939.
Unemployment has already reached the average rate the White House projected for the whole year. The administration needs to keep its focus on repairing the banking system and implementing the stimulus rather than get diverted by other goals such as healthcare changes, said John Ryding, chief economist at RDQ Economics LLC in New York.
“They should be focused on stabilisation” of financial firms “and stimulus, and that should not only be ‘Job one,’ that should be the only job right now,” Ryding said in an interview with Bloomberg Television. “The question is, is it recession or is it something worse than recession?”
US stocks posted the biggest weekly decline in three months after American International Group Inc reported a $61.7 billion loss and billionaire investor Warren Buffett said the economy is in “shambles.”
Debt concerns
The Standard & Poor’s 500 Stock Index slumped 7 per cent this week, bringing the drop since President Barack Obama took office on January 20 to 20 per cent. Benchmark 10-year Treasury yields rose to 2.88 per cent on Saturday from 2.81 per cent the previous day amid concern the government will need to sell more debt.
While the president’s $787 billion stimulus plan aims to create or save 3.5 million jobs, the US has already lost 4.4 million since the recession began in December 2007, with more declines coming. Tumbling global demand is prompting companies from General Motors Corp to Sears Holdings Corp to step up firings.
“Without any engines of growth, the labour market and the economy are likely to remain depressed for some time,” Joseph LaVorgna, chief US economist at Deutsche Bank Securities Inc in New York, wrote in a note. LaVorgna now sees the jobless rate reaching 10 per cent by year-end, and he abandoned his call for economic growth to emerge in the second half of 2009.
‘All that’s necessary’
Obama said on Sunday that he’s “committed to doing all that’s necessary to address this crisis,” citing the already-passed stimulus package and measures to slow the tide of home foreclosures and to unlock credit.
“These aren’t just statistics, but hardships experienced personally by millions of Americans who no longer know how they’ll pay their bills, or make their mortgage, or raise their families,” Obama said in his weekly address.
Revisions to January and December statistics lopped an additional 161,000 jobs from previous estimates, the Labor Department’s figures showed.
Payrolls were forecast to drop by 650,000, according to the median of 80 economists surveyed by Bloomberg News. The jobless rate was projected to jump to 7.9 per cent.
“We’re going to have to have a lot more jobs than 3.5 million” generated to get a “serious recovery” in the economy, Harvard University professor Robert Barro said in a Bloomberg Television interview. Barro calculated a 30 per cent chance the US will slide into a depression, which he characterised as at least a 10 per cent drop in gross domestic product.
Factory payrolls
Factory payrolls fell by 168,000 after declining 257,000 in the prior month. Economists forecast a drop of 200,000. The decrease included 25,300 jobs in producers of machinery and 27,500 in makers of fabricated metal products.
Automakers, at the heart of the manufacturing slump, continued to slash jobs and trim costs to stay in business. General Motors last month said it would cut 47,000 more positions globally while Chrysler LLC announced 3,000 more layoffs.
Auto-parts makers are also suffering. Canton, Ohio-based Timken Co, the supplier of bearings to the world’s top five carmakers, said March 2 it would eliminate as many as 400 salaried jobs this year.
Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 375,000 workers after cutting 276,000. Financial firms cut 44,000 positions after a 52,000 decline the prior month. Retail payrolls decreased by 39,500 after a 38,500 drop.
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