Dismal jobs data adds urgency to stimulus

John W. Schoen Senior producer • Profile • E-mail

Friday’s dismal report on the rapid loss of jobs in January has added new urgency to the government’s efforts to reverse one of the worst economic downturns in memory.

But even if Congress and the White House can agree on a huge program of fresh spending and tax cuts to get the economy going again, it could take years to create enough new jobs to rehire the idle workers and keep up with growth in the labor force, economists say.

The U.S. economy has been shedding about a million jobs every two months, and there are no signs that pace will ease up soon. New figures published Friday morning showed the U.S. economy lost 598,000 jobs in January, the most since the end of 1974, pushing the U.S. unemployment rate up to 7.6 percent.

“There can be no sugar-coating this report,” John Ryding, chief economist of RDQ Economics, wrote in a note to clients. “The rate of job losses massively intensified in November and there has been no change in trend since then.”

Job losses in the last two months of 2008 were worse than originally reported; revisions in the government data showed businesses cut 577,000 jobs in December and 597,000 in November. That brings to 3.6 million the total number of jobs lost since the recession began in Dec., 2007.

The data provided fresh evidence of the urgency for government action to try to head off the loss of millions more jobs. As President Barack Obama announced a new economic recovery advisory board Friday, he said the jobs data demand action and that it's "inexcusable and irresponsible" for Congress to delay his economic recovery package. He cautioned that recovery won't come quickly.

"No single act can meet the challenges of this moment," said Obama. "This process is just the beginning of a long journey back to progress and prosperity."

The White House is also scrambling to revise a $700 billion financial rescue program that has drawn fire for failing to spur banks to ease tight credit and lend more to businesses and consumers. Treasury Secretary Timothy Geithner is expected to deliver a speech on Monday outlining the new plan.

Evidence began mounting before Friday’s report that the pace of layoffs may be picking up speed. The number of workers filing their first claim for jobless benefits last week was much higher than expectations — up by 35,000 to 626,000, the highest level in 26 years.

And it's taking longer for those who lost jobs to find new ones. The average time it took for an unemployed person to find new work — full or part time — rose to 19.8 weeks in January, compared with 17.5 weeks a year ago, according to government data.

Big companies announced over 240,000 layoffs last month, a seven-year high, according to  Challenger, Gray and Christmas, an outplacement firm. As job cuts deepen, they’re also widening to industries that had been holding up relatively well.

"We're certainly seeing layoffs coming from all corners of the economy," said John Challenger, the firm's CEO. "That's one of the things that is really unique about what's happening right now. It's not just automotive and banking and housing. We're seeing it in pharmaceuticals and telecom and heavy equipment."

For much of the past two decades, the bulk of job creation came from small businesses, which account for more than half of all private sector jobs. While large-scale layoffs at big companies are getting the biggest headlines, weakness in the job market is now spreading to smaller companies, according to Joel Prakken, chairman of Macroeconomic Advisers, which manages a monthly employment survey conducted by payroll processor ADP.

"Early in this episode, the job loss seemed concentrated in the larger firms," said Prakken. "But in the last several months, they've spread quite aggressively to medium- and small-sized outfits. That leaves no doubt the recession has been spread beyond the epicenter of housing and mortgage-related finance out into the mainstream economy."

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