Job Losses at 600,000 - and Counting
http://www.truthout.org/article/job-losses-600000-and-counting
Freeze in credit would only worsen unemployment as economic
slowdown intensifies.
New York - Job losses have been mounting, and the slowing economy
and credit crunch is likely to take an even greater toll in the coming
months.
Analysts on average forecast that the monthly employment report
expected Friday will reveal that the economy shed 105,000 jobs in
September - the largest monthly loss in five years. The economy
already has lost 605,000 jobs this year.
Unemployment is expected to remain at a relatively high 6.1%.
What's more troubling is that hiring trends have deteriorated even
further in recent weeks - and that won't be reflected in government
statistics until later this year.
Failing mortgages and struggling banks have made it difficult for
businesses and consumers alike to borrow money. If businesses can't
borrow money, the thinking goes, they can't expand stores or hire more
people.
"A complete lockup of the credit markets will reverberate
throughout the economy in a very severe fashion," said Martin Regalia,
chief economist at the U.S. Chamber of Commerce, a business lobby
group. "If the economy weakens further, we'll see truly dramatic
unemployment."
Regalia expects unemployment to reach 6.5% by the end of the first
quarter next year, and 7% if nothing is done by the government to free
up the capital markets. While the economy may stop shedding jobs at
that point, he said those stubbornly high rates of unemployment could
persist until the end of 2009.
Actual job losses are more difficult to predict. Regalia said
150,000 to 175,000 a month could be likely, significantly higher than
today's levels but far below the rate of 250,000 to 300,000 lost
during the last recession in 2002.
The government is still negotiating a package that would enable
the purchase of distressed assets from banks in the hopes of getting
them to lend again. The $700 billion bailout was rejected in the House
of Representatives on Monday, and the Senate is going to vote on a
revised version on Wednesday night.
"If we don't have measures to correct the situation, we will see
more [job] losses," said Joyce Bastoli, a vice president at Ajilon
Finance Solutions, part of the staffing company Adecco. "If companies
don't have access to capital, we will see it trickle down."
The Real Problem: Slowing Economy
Still, while there were some encouraging signs that the credit
crisis is not having as devastating an impact as some fear, the
slowing economy looms large.
"We're not seeing anything besides the normal tightening of credit
you usually get at the end of an expansion," said Bill Dunkelberg,
chief economist for the National Association of Independent
Businesses.
Alan Tonelson, a research fellow at the U.S. Business and Industry
Council, which represents smaller and mid-size manufacturers, said
that most manufacturers are conservatively managed and have fairly low
levels of debt. Tonelson is urging caution on any government bailout,
saying banks should not be encouraged to resume their free-lending
ways to consumers already overburdened with debt.
Even if businesses aren't yet impacted by the credit crunch, they
are certainly planning for slowing sales as credit to consumers dries
up. That could mean fewer orders for goods - and fewer people needed
to manufacture, ship, stock and sell those goods.
"It's reasonable to expect not only job losses, but wage losses as
well," said Tonelson.
Said Daniel Penrod, an industry analyst with the California Credit
Union League, a trade association for credit unions: "We haven't
really seen small businesses getting hurt because of access to money,
but rather just because of the slowdown."
With the holiday shopping season just around the corner, the next
sector ripe for a hit is retail, said John Challenger, chief executive
of global outplacement firm Challenger, Gray & Christmas. A survey by
Challenger released Wednesday said that the number of job cuts in
September rose 7.2% to 95,094.
"Consumers are tapped, it's going to be a tough year," said
Challenger. "Unemployment is going up by leaps and bounds."
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