You're hired. Now help the rest of us find a job.
That's the unmistakable message to Barack Obama, just days after his historic election. The unemployment rate, which rose to 6.5 percent in October, is now the highest it has been since 1994. And with dozens of companies announcing layoffs recently, most economists think unemployment could rise well above 7 percent next year, as workers get their termination notices. Unemployment might even approach the levels of the early 1980s, when the nation endured the most wrenching recession since World War II.
For most of this year, job losses have been confined to a few troubled areas, such as the swooning financial sector and the embattled housing industry. For a while, there was hope that resilient consumers would spend their way out of a recession. But the ballooning rolls of the unemployed show that the economic downturn is now spreading through most of the economy, possibly triggering the dreaded "adverse feedback loop": Workers who fear for their jobs refuse to spend money, which further lowers business revenue, leading to more layoffs and making consumers even more worried. At which point everybody hoards money except for the government, which takes on an epic amount of debt as it tries to make up for penny-pinching shoppers.
As President-elect Obama huddles with his new team of economic advisers, here's what the latest employment data are telling them about how the recession is deepening:
It's bad where you'd expect. In the auto industry, for instance—where sales have plunged 15 percent this year—companies like General Motors, Ford, Chrysler, and their many suppliers have cut more than 110,000 jobs this year, according to outplacement firm Challenger, Gray & Christmas. Bank mergers and recent cuts like 3,200 layoffs at Goldman Sachs have axed 130,000 jobs in the financial sector. Those two industries alone account for about 25 percent of all layoffs announced this year, according to Challenger.
Even "safe" industries are suffering. Government and healthcare jobs are supposed to be among the most stable, but this time around, there's no such thing as "recessionproof" industries. Challenger's data show major cuts in the pharmaceutical industry, for example, where Merck just announced it would lay off a whopping 7,200 people. Government payrolls are declining, too, as states and cities run short of tax revenue that funds their operations. The state of California has already laid off more than 10,000 workers and cut pay for 200,000 more, while warning much deeper cuts could be coming as it grapples with a funding gap that could reach $10 billion.
Entrepreneurship offers no respite. During other recent downturns, many laid-off workers have turned adversity to their advantage by starting their own businesses. But the credit freeze, which has made funding scarce even for profitable businesses, appears to be strangling that option: Small businesses cut about 25,000 workers in October, according to the ADP Employment Report. That's the biggest decline since 2002.
Workers know it's going to get worse. Consumers will probably show a minor gain in confidence now that the campaign is over and they know who's in charge. But if the stock markets are any indication, Obama won't get points just for showing up. The markets, bracing for bad economic news, fell steeply in the days following the election, and consumers, too, expect deep problems. In the latest Conference Board survey, for example, only 7.4 percent of consumers said they expect there to be more jobs in six months, while 41.5 percent think there will be fewer. It would be nice to think a new president will be able to change that. But for several months, expect the data to show otherwise.