WASHINGTON (AP) — The government says employers slashed payrolls by 598,000 in January, the most since the end of 1974, catapulting the unemployment rate to 7.6 percent.
The Labor Department’s report is grim proof the nation’s job climate is deteriorating at an alarming clip with no end in sight.
Job losses were far worse than the 525,000 economists expected. So was the rise in the unemployment rate, now at the highest since September 1992.
Employers are slashing payrolls and turning to other ways to cut costs — including trimming workers’ hours, freezing wages or cutting pay — to cope with shrinking appetites from customers in the United States and in other countries, which are struggling with their own economic troubles.
“It is as rocky as I’ve ever seen it. Businesses have seen such revenue shortfalls that they are really up against the wall and have no choice but to cut workers,” said Mark Vitner, an economist at Wachovia Corp.
An avalanche of layoffs is slamming the nation from a wide swath of employers.
Caterpillar Inc., Pfizer Inc., Microsoft Corp., Estee Lauder Cos., Time Warner Cable Inc., and Sprint Nextel Corp. are among the companies slicing payrolls. Manufacturers — especially car makers — construction companies and retailers have been particularly hard hit by the recession. Talbots Inc., Liz Claiborne Inc., Macy’s Inc. and Home Depot Inc. are all cutting jobs. So are Detroit’s General Motors Corp. and Ford Motor Co.
Americans cut back sharply on spending at the end of last year, thrusting the economy into its worst backslide in a quarter-century. The tailspin could well accelerate in the current January-to-March quarter to a rate of 5 percent or more as the recession drags on into a second year and consumers and businesses burrow deeper under all the economy’s negative forces.
Vanishing jobs and evaporating wealth from tanking home values, 401(k)s and other investments have forced consumers to retrench. And, in turn, companies are pulling back. It’s a vicious cycle where all the economy’s problems feed on each other, perpetuating a downward economic spiral.
Many economists predict the current quarter — in terms of lost economic growth — will be the worst of the recession.
With fallout from the housing, credit and financial crises — the worst since the 1930s — ripping through the economy, analysts predict up to 3 million jobs will vanish this year — even if Congress quickly approves the stimulus measure.
President Barack Obama has been making repeated pleas to Congress to swiftly enact a multibillion-dollar package of increased government spending including big public works projects as well as tax cuts to revive the economy and create jobs. Obama says his plan will save or create more than 3 million jobs in the next two years.
The Senate is racing ahead to complete action on a $920 billion plan— including more money for unemployment benefits — that will have to be reconciled at some point with the $819 billion package passed by the House.
The economy’s problems have proven stubborn. Despite record low interest rates ordered by the Federal Reserve and a raft of radical programs, including a $700 billion financial bailout, consumers and businesses face high hurdles to borrow money, foreclosures are skyrocketing, home prices are sinking and Wall Street remains on edge.