The US government announced yesterday that more workers were dismissed in October than in any single month since May 1980 and that the unemployment rate had jumped from 4.9 to 5.4 per cent. US businesses cut payrolls by 415,000 in October, a higher-than-expected figure indicating the country is entering a broader and more severe recession than analysts had predicted.
"It's not good news for America," said US President George W Bush, who conceded the attacks "have deeply affected the lives of hundreds of thousands of people and threatened the livelihoods of American workers". US Labor Secretary Ms Elaine Chao said the slump affected "nearly every major industry", with the biggest losses in airline and other travel-related industries and in hotels and restaurants.
The blow to the job market rattled an economy already in the early stages of recession, but Wall Street seemed to take the news in its stride - an indication that the markets have stabilised somewhat, already having factored in the worst economic news recently.
The Dow Jones closed up 59.71 at 9,323.61, but the job figures nevertheless shocked Wall Street economists who had expected payrolls to fall by less than 300,000 and that the unemployment rate would edge up to 5.1 per cent, according to a survey by Thomson Global Markets. The new rate of 5.4 per cent is the highest since December 1996.
The service sector cut 241,000 jobs - the biggest retrenchment in 18 years - and the manufacturing sector 142,000 jobs, marking the 15th consecutive month of decline. Since March, manufacturers have eliminated 887,000 jobs. The Labor Department also said job losses in September were greater than calculated, amounting to 213,000 rather than 199,000 as originally reported.
Mr Bush said in a statement in the White House that Congress should act quickly "to prevent further loss of jobs by passing a stimulus package which will cause the job base to firm up and expand" and "show the nation that we can deal with the aftermath of this tragedy". The President has set the end of November as a deadline for Congress to agree on an outline package of stimulus measures which Republicans want to weight heavily with massive tax breaks to industry - but which Democrats say does not do enough for unemployed workers. With inflation under control and evidence mounting daily of a broadening and steepening economic slowdown, analysts expect another aggressive cut in interest rates by the Fed policy committee at its next meeting on November 6th.
After Wednesday's announcement that GDP, a measure of total economic activity, shrank in the third quarter by 0.4 per cent, JPMorgan yesterday lowered its growth forecast for the October-December period from -1.5 per cent to -2.0 per cent.
