The U.S. economy lost 159,000 jobs last month, the steepest monthly drop since March 2003, the Labor Department reported today. The employment report, which will be the last before Americans head to the voting booth next month, comes on the heels of Wall Street's financial crisis and amid congressional action on a $700 billion investment program designed to boost credit availability in the financial markets.
The September job losses sailed above economists' median forecast of 105,000, as surveyed by Bloomberg. The unemployment rate remained steady at 6.1 percent, which met economists' projections.
Ian Sheperdson, chief U.S. economist at High Frequency Economics, wrote in a morning note that despite the unchanged unemployment rate, the trend is rising quickly. "The U.S. economy is shrinking and there will be many more awful reports like this," Sheperdson writes.
The private sector's losses were steeper—168,000 jobs were shed from nearly all sectors: Manufacturing lost 51,000 jobs, with the largest chunk related to the ailing auto industry; construction lost 35,000 jobs; retail lost 40,000; transportation and warehousing lost 16,000. Job gains were seen in healthcare and education, mining, and government.
The Labor Department noted that Hurricane Ike did not likely have a substantial effect on the employment figures.
Along with home prices declining, credit tightening, and food and energy prices swallowing a larger chunk of income, the jobs report paints an ugly picture for consumers and shows no support for consumer spending, says Joshua Shapiro, chief U.S. economist for the research firm MFR Inc. "It was a terrible report," Shapiro says. "Our job shedding is accelerating, private sector numbers are worse than the headline numbers, the workweek is shrinking, total hours worked is declining at an accelerated pace. There's no silver lining here."
Americans worked an average of 33.6 weekly hours in the month, down from 33.7 in July and August. The number of Americans working part-time jobs because either their hours were cut back or full time jobs couldn't be found rose by 337,000 to 6.1 million.
The economy began bleeding jobs in January after 52 straight months of gains. The economy has lost 760,000 jobs since the start of the year. The declines have been smaller than in previous down cycles—as in 2001—in part because U.S. companies began the year with leaner payrolls. Companies have not been firing much because they weren't hiring much to being with. A U.B.S. report released last week suggested that layoffs were not imminent at more than half of the companies in the Standard & Poor's 500 Index—albeit a slim sector of the American workforce.
Alan Levenson, chief economist at T. Rowe Price, expects monthly job losses of about 135,000 into the beginning of next year, with declines narrowing in the spring, and new job growth in the second half of the year.
The economy continues to play a major role in the presidential race. A recent survey by the Kauffman Foundation found 87 percent of Americans expected to experience some negative effect from the crisis on Wall Street.