Feb. 6 (Bloomberg) — The unemployment rate reached the highest level since 1992 and payrolls tumbled in January, with millions more likely to lose their jobs before a stimulus and emergency-lending programs temper the U.S. economy’s freefall. The jobless rate rose to 7.6 percent from 7.2 percent in December, the Labor Department said today in Washington. Payrolls fell by 598,000, the biggest monthly decline since December 1974. Losses spanned almost all industries, from construction and manufacturing to retailing, trucking, media and finance. “We are in the middle of a very severe, a violent, collapse in activity and it could go on for months,” James Galbraith, an economics professor at the University of Texas in Austin, said in an interview with Bloomberg Television.
The report will likely diminish objections “that somehow the president’s recovery plan is too large and should be trimmed back.” President Barack Obama, who predicted a “dismal” report, is pushing lawmakers to approve a package of about $900 billion, and in three days plans to announce a new effort to shore up credit markets. The rate of the job market’s decline means it’s unlikely the steps will halt a collapse in consumer spending until the second half of the year, economists said. Millions Hurt “We’ll see households pull way back, the economy is still in freefall,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts. “We’ll probably see job losses of another 2 million to 3 million before this is over.” Payrolls have already plunged by 3.57 million so far. Treasuries slipped while stocks headed higher after the figures, indicating some investors feared an even worse January employment report.
The Standard & Poor’s 500 Stock Index gained 2.7 percent, closing at 868.60. Benchmark 10-year note yields rose to 2.99 percent from 2.90 percent late yesterday. The loss of jobs, at employers ranging from manufacturers like Caterpillar Inc. to retailers such as Macy’s Inc., is shattering consumer confidence and crippling spending. Household purchases fell more than 3 percent at an annual rate in the past two quarters, the first time that’s happened since at least 1947. With revised declines of 577,000 for December and 597,000 for November, revisions subtracted 66,000 workers from previously reported figures for the last two months of 2008. The 3.57 million jobs lost since the recession started in December 2007 marks the biggest employment slump of any economic contraction in the postwar period. Worst on Record Last month’s losses also cap the first time since records began in 1939 that job cuts exceeded half a million in three consecutive months. Payrolls were forecast to drop 540,000, according to the median estimate of 75 economists surveyed by Bloomberg News. The jobless rate was projected to jump to 7.5 percent.
Senate lawmakers are deliberating on a stimulus bill after the House of Representatives last week passed an $819 billion package that includes tax cuts, spending on schools, roads and other infrastructure, and aid to states. Christina Romer, chairwoman of Obama’s Council of Economic Advisers, said today in a statement that “the unemployment rate could reach double digits” without the stimulus. Obama today urged Congress to wrap up its work on the package, saying it would be “inexcusable” to get “bogged down in distraction, delay or politics-as-usual while millions of Americans are being put out of work.” Factory Jobs Today’s report showed factory payrolls decreased by 207,000, the biggest drop since October 1982, after declining 162,000 in December. Economists had forecast a January drop of 145,000. The decrease included a loss of 31,300 jobs in auto manufacturing and parts industries.
Caterpillar, the world’s largest maker of construction equipment, on Jan. 30 said it plans to cut 2,110 workers in addition to the 20,000 reductions it reported earlier in the month. Payrolls at builders declined 111,000 after decreasing 86,000. Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 279,000 workers after cutting 327,000. Retail payrolls decreased by 45,100 after a decline of 82,700. Financial firms reduced payrolls by 42,000, after a 27,000 decrease the prior month. Government payrolls increased by 6,000 after shrinking by 10,000 the prior month.