Here is one for you. What do you think? Job Losses Pushing U.S. Economy Into `Significant' Recession
By Rich Miller and Shobhana Chandra Oct. 4 (Bloomberg) -- The U.S. may be heading for its worst recession in at least a quarter century as the credit crisis forces employers across the country to cut workers and ratchet back spending. Labor Department figures showed yesterday that payrolls fell by 159,000 in September, the biggest reduction in five years. While the unemployment rate held at 6.1 percent, that's up from 5 percent as recently as April. Some economists, including Goldman Sachs Group Inc.'s Jan Hatzius, said it rise as high as 8 percent as the credit crunch hammers consumers and companies. ``We're in this self-reinforcing negative cycle,'' said Mark Zandi, chief economist at the West Chester, Pennsylvania-based Moody's Economy.com. ``It's going to be a very significant recession.'' That's bad news for Republican presidential candidate John McCain as the campaign enters its final month. The jobless rate has only risen twice in the year leading up to elections since World War II and in each case the party in power lost. ``Voters praise or blame the incumbent party in the White House for the economy,'' said Ray Fair, a professor at Yale University in New Haven, Connecticut. ``Rising unemployment is a negative for McCain.'' A computer model Fair has developed to forecast the election based on the economy shows the 72-year-old Arizona senator losing to his Democratic rival, Senator Barack Obama, 47, on Nov. 4. Mounting job losses also put pressure on policy makers to do more to aid the economy. Federal Reserve Chairman Ben S. Bernanke is slated to speak to economists in Washington on Oct. 7 and some central bank watchers said he might use the opportunity to signal that a reduction in interest rates is in the offing. Rate Cuts ``The Fed is expected to cut interest rates soon and ultimately take the federal funds rate down to 1 percent,'' said Nigel Gault, chief U.S. economist at Global Insight in Lexington, Massachusetts. The target federal funds rate -- the rate that banks charge each other for overnight loans -- is now 2 percent. At the Treasury, Secretary Henry Paulson moved quickly to put a $700 billion bank rescue plan approved by Congress into effect. He's recruiting asset managers, bankers and lawyers to help the Treasury get the plan off the ground. While that may eventually help limit the damage, economists said the economy is likely to get worse before it gets better. ``It's just gotten to the point where a lot of companies will be forced to cut costs more aggressively and they'll look for those in jobs,'' said Scott Anderson, senior economist at Wells Fargo & Co. in Minneapolis. Losses Spread Job losses in September were widespread as the weakness that began in the housing market expanded to other parts of the economy. Aside from a 9,000 gain in government payrolls, all major categories dropped except education and health care. Edelmira Clark, 53, of Chicago, said she was concerned about losing her job as a hotel housekeeper. Her company has already cut her work hours to two days a week. ``I'm trying to find a part-time job in the morning to balance, because I can't do only two days of work,'' said Clark, who immigrated to Chicago from Belize in 1997. ``But a lot of people, my friends, have lost their jobs for good.'' The September employment report showed that the work week shrank to match the lowest level since records began in 1964. Even lawyers are hurting. Peter Cronan, a former professional football player who is now vice president of a litigation support firm in Boston, said the company is stepping up its layoffs as the economy weakens. ``We've just put the accelerator on'' firings, said the 53- year-old Cronan. ``It's survival.'' Vicious Spiral The risk now is that the 13-month-old credit crisis and the recessionary economy begin to feed off each other in a vicious spiral that makes both worse. Companies from newspaper publisher Gannett Co. to slot machine maker Bally Technologies Inc. are finding it harder to raise cash as frightened investors and bankers pull back. That's undermining the economy and deepening the recession, giving lenders yet another reason to hoard cash. ``The credit flow appears to be a trickle,'' said former Fed governor Lyle Gramley, now senior economic adviser at the Stanford Group Co. in Washington. ``If that persists, we'd be seeing job losses of 300,000 to 400,000 a month and consumer spending collapsing.'' The National Bureau of Economic Research, which is the official arbiter of U.S. economic cycles, has yet to call a recession. The group, which bases its assessment on indicators including employment, sales, incomes and industrial production, usually takes six to 18 months to make a determination. `Waiting Mode' As gross domestic product figures have still ``not recorded the bad news, we are in waiting mode,'' said Robert Hall, the Stanford University economist who heads the committee. Still, many economists have little doubt that a recession has begun. The only questions are how long it will last and how deep it will be. Zandi and Gramley said the economy already looks likely to suffer a bigger decline than in the last two recessions in 2001 and 1990-91 and may rival the 1980-82 slump, during which GDP shrank by 2.7 percent. The increase in the jobless rate may be even worse. If unemployment rises as high as the 8 percent forecast by Hatzius, Goldman's chief U.S. economist, that would mean that it had jumped by more than it did in the early 1980's. ``The economy is being hit on all fronts,'' said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. ``We may be entering a deep recession.'' To contact the reporters on this story: Rich Miller in Washington [EMAIL PROTECTED] Shobhana Chandra in Washington [EMAIL PROTECTED] Last Updated: October 4, 2008 00:01 EDT On Oct 3, 10:11 pm, Frank <[EMAIL PROTECTED]> wrote: > Not a single one of you know what is going on. The United States is in > a financial catasrophe and you lot are playing in the sand pit like 4 > year olds. Do any of you read the daily finacial reports? > > Try reading Bloomberg's, you might end up learning something, though > that may prove inconvenient. --~--~---------~--~----~------------~-------~--~----~ Thanks for being part of "PoliticalForum" at Google Groups. For options & help see http://groups.google.com/group/PoliticalForum * Visit our other community at http://www.PoliticalForum.com/ * It's active and moderated. Register and vote in our polls. * Read the latest breaking news, and more. -~----------~----~----~----~------~----~------~--~---
