October 7, 2008

Economist warns U.S. economy on ‘slippery slope of recession’

WASHINGTON

U.S. employers slashed payrolls by 159,000 in September, the most in more than five years, a worrisome sign that the economy is hurtling toward a deep recession.

The U.S. Labor Department’s fresh snapshot, released last Friday, also showed that the U.S. unemployment rate held steady at 6.1 per cent as hundreds of thousands of people streamed out of the work force for any number of reasons.

The reduction in payrolls was much sharper than the 100,000 cuts economists were forecasting. They expected the jobless rate to be unchanged.

It marked the ninth straight month that the U.S. economy has lost jobs. The drop underscores fallout from a long slump in the housing market and a dangerous credit crunch that intensified last month throwing Wall Street — and the economy — into chaos.

So far this year, 760,000 jobs have disappeared.

“The economy is now sliding down the slippery slope of recession,” said economist Ken Mayland, president of ClearView Economics.

The White House called the latest employment report disappointing, “but not unexpected given the shocks to the economy” and was urgent proof Congress need to complete action on a US$700 billion financial bailout.

“Everyone should understand that it will take some time for our economy to recover from the housing correction, elevated energy prices, and the credit crisis,” said spokesman Tony Fratto. “The best action we can take to limit damage to the economy is to pass the emergency rescue package legislation in the House.”

Employers cut 73,000 jobs in August, slightly less than the 84,000 initially estimated, according to revised figures. However, the cuts in July turned out to be a bit deeper — 67,000 versus the 60,000 previously reported.

The 159,000 jobs lost in September were the most since March 2003, when the labor market was still struggling to get back on its feet after being knocked down by the 2001 recession.

Job losses were widespread last month.

Manufacturers cut 51,000 jobs, construction companies axed 35,000 jobs, retailers got rid of 40,000 positions, business services shed 27,000 and financial services slashed 17,000 positions, with securities and investment firms accounting for 8,000 of those reductions. Leisure and hospitality companies also reduced employment by 17,000. That overwhelmed employment gains by the government, in education, health and elsewhere.

Cost-cutting employers are getting rid of workers as companies chafe under a slew of problems related to the economy’s slowdown, a painful housing collapse and a dangerous credit crunch.

Companies announcing layoffs in September included Hanesbrands Inc., Hewlett-Packard Co., Schering-Plough Corp., Alaska Airlines and Alcoa Inc.

Associated Press

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