Jobless Rate 7.6%; Most Job Cuts Since '74
Recession-battered employers eliminated 598,000 jobs in January, the most since the end of 1974, and catapulted the unemployment rate to 7.6 percent. The grim figures were further proof that the nation's job climate is deteriorating at an alarming clip with no end in sight.
The Labor Department's report, released Friday, showed the terrible toll the drawn-out recession is having on workers and companies. It also puts even more pressure on Congress and President Barack Obama's administration to revive the economy through a stimulus package and a revamped financial bailout plan, both of which are nearing completion.
Mr. Obama decried as "inexcusable and irresponsible" the delay of his economic recovery legislation in Congress with an estimated 3.6 million Americans losing their jobs since the recession began in December 2007. About half of them have lost jobs in only the past three months.
However, late Friday, key senators and the White House reached tentative agreement on the economic stimulus measure.
Before the tentative deal was reached, Mr. Obama acknowledged the stimulus plan was not perfect and pledged to work with lawmakers to refine the measure, which he called "absolutely necessary."
"These numbers demand action. It is time for Congress to act," Mr. Obama said bluntly. "That's 3.6 million Americans who need our help."
According to a new CBS News poll, Americans are more concerned about losing their jobs than at any point in more than a decade. Forty-four percent are very concerned that they or someone in their household will be laid off and on the job market sometime in the next twelve months. That's an increase of 14 points from last month and the highest number since CBS News began asking the question in 1996. Another 28 percent are somewhat concerned about losing their job.
Many Americans have been forced to make a career change, reports CBS News correspondent Anthony Mason. In Sacramento, Calif., Isaac Tisdale, a laid off construction worker, cashed out $6,000 from his 401(k) to pay for barber school tuition. He hopes to open his own shop.
"You are never going to get anywhere unless you invest in yourself," Tisdale told Mason.
Many economists said job losses for February are likely to be just as bad, and they don't expect the labor market to return to decent health until 2011 at the earliest.
For January, the net total of job losses was far worse than the 524,000 that economists expected. Job reductions in November and December also were deeper than previously reported.
With cost-cutting employers in no mood to hire, the unemployment rate bolted to 7.6 percent in January, the highest since September 1992. The increase in the jobless rate from 7.2 percent in December also was worse than the 7.5 percent rate economists expected.
Vanishing jobs and evaporating wealth from tanking home values, 401(k)s and other investments have forced consumers to retrench, which has required companies to pull back. It's a vicious cycle where the economy's problems feed on each other, perpetuating a downward spiral.
"Companies are in survival mode and are really cutting to the bone," said economist Ken Mayland, president of ClearView Economics. "They are cutting and cutting hard now out of fear of an uncertain future."
But on Wall Street, investors pushed up stock prices on hopes that the miserable jobs report would get Congress to move quickly on the economic revival package. The Dow Jones industrials gained about 190 points in late-afternoon trading and broader stock indicators also rose.
Factories slashed 207,000 jobs in January, the largest one-month drop since October 1982, partly reflecting heavy losses at plants making autos and related parts. Construction companies got rid of 111,000 jobs. Professional and business services chopped 121,000 positions. Retailers eliminated 45,000 jobs. Leisure and hospitality axed 28,000 slots.
Those reductions swamped employment gains in education and health services, as well as in the government.
Employers are slashing payrolls and turning to other ways to cut costs - including trimming workers' hours, freezing wages or cutting pay - to cope with shrinking appetites from customers in the U.S. and overseas, who are struggling with their own economic troubles.
The average work week in January stayed at 33.3 hours, matching the record low set in December.
With no place to go, the number of unemployed workers climbed to 11.6 million. In addition, 7.8 million people were working part time - a category that includes those who would like to work full time but whose hours were cut back, or those who were unable to find full-time work.
For example, more than 200,000 state government employees were expected to stay home without pay Friday in California, which began its first-ever furlough to save money during the ongoing fiscal crisis.
Job hunters also are facing longer searches for work.
The average time it took for an unemployed person to find any job - full or part time - rose to 19.8 weeks in January, compared with 17.5 weeks a year ago, underscoring the increasing difficulty the out-of-work are having in finding a new job.
Workers with jobs saw modest wage gains.
Average hourly earnings rose to $18.46 in January, up 0.3 percent from the previous month. Over the year, wages have risen 3.9 percent.
An avalanche of layoffs is slamming the nation from a wide swath of employers.
Caterpillar Inc., Pfizer Inc., Microsoft Corp., Estee Lauder Cos., Time Warner Cable Inc., and Sprint Nextel Corp. are among the companies slicing payrolls. Manufacturers - especially car makers - construction companies and retailers have been particularly hard hit by the recession. Talbots Inc., Liz Claiborne Inc., Macy's Inc. and Home Depot Inc. are all cutting jobs. So are Detroit's General Motors Corp. and Ford Motor Co.
For all of 2008, the economy lost a net total of 2.9 million jobs, according to revised figures. That marked the biggest annual loss on record and was worse than the 2.6 million initially estimated last month.
Americans cut back sharply on spending at the end of last year, thrusting the economy into its worst backslide in a quarter-century. The tailspin could well accelerate in the current January-March quarter to a rate of 5 percent or more as the recession drags on into a second year, and consumers and businesses burrow deeper.
Many economists predict the current quarter - in terms of lost economic growth - will be the worst of the recession.
With fallout from the housing, credit and financial crises - the worst since the 1930s - ripping through the economy, analysts predict 3 million or more jobs will vanish this year even if lawmakers quickly approve Mr. Obama's stimulus plan.
Mr. Obama has repeatedly pressed Congress to swiftly enact a package of increased government spending, including big public works projects and tax cuts, to revive the economy and create jobs. He says his plan will save or create more than 3 million jobs in the next two years.
But the recession has proven stubborn. Despite record low interest rates ordered by the Federal Reserve and a raft of radical programs, including a $700 billion financial bailout, consumers and businesses face high hurdles to borrow money. Foreclosures are skyrocketing, home prices are sinking and Wall Street remains on edge.