The American economy lost 159,000 jobs in September, the worst month of retrenchment in five years, the government reported on Friday, enhancing fears that an already pronounced downturn had entered a more painful stage that could last well into next year.
Employment has diminished for nine consecutive months, resulting in the elimination of 760,000 jobs, according to the Labor Department report. Most of that occurred before the trauma of recent weeks, when a string of prominent Wall Street institutions nearly collapsed, prompting the government to propose a $700 billion rescue package.
“It’s a dismal report and the worst thing about it is that it does not reflect the recent seizure that we’ve seen in the credit markets,” said Michael T. Darda, chief economist at MKM Partners, a research and trading firm in Greenwich, Conn. “There’s really nothing good about this report at all. We’ve lost jobs in nearly every area of the economy, and this is going to worse before it gets better because the credit markets have deteriorated basically on a daily basis for the last few weeks.”
Only a few weeks ago, some economists still held out hopes that the economy might recover late this year or early next. But with the job market now swiftly deteriorating and fear dogging the financial system, what optimism remained has given way to the broad assumption that 2008 is a lost cause.
Most economists have concluded that, even in the rosiest outlook, the economy will continue to struggle well into next year. As anxiety spreads that banks may continue to hoard their dollars regardless of a rescue package from Washington, depriving businesses of capital needed to expand, more pessimistic forecasts call for the economy to remain weak through all of next year, before a hesitant recovery in 2010.
“This is an economy in recession, and every dimension of the report confirms that,” said Ethan S. Harris, an economist at Barclays Capital. “This has been preceded by a slow-motion recession. Now we’re going into the full-speed recession that will last somewhere between three and five quarters.”
For the first eight months of the year, the economy lost an average of about 75,000 jobs each month. September’s report more than doubled the damage, heightening the sense that an already weak economy has become even more frail.
As real estate prices have fallen over the last two years, American households have tightened up, curbing their spending. Businesses have cut payrolls in response to weakening sales, taking more paychecks out of the economy and weakening spending power further. Now that downward spiral is turning faster.
“Before the crisis took hold, the deterioration was worsening, and it sets us up for some really grim news in the immediate future,” said Robert Barbera, chief economist at the research and trading firm ITG. “Credit was already hard to get in early September. But it’s really impossible to get now as we enter the fourth quarter of the year.”
The government’s monthly snapshot of the labor market detailed a relentless assortment of woes afflicting American working families.
Manufacturing lost 51,000 jobs in September, bringing the decline so far this year to 442,000 and more than 4 million since 1999. Retailers lost 35,000 jobs in September. The construction sector shed 35,000 jobs. Employment in transportation and warehousing slid by 16,000.
Jobs in financial services dropped by 17,000 in September and have slipped by 172,000 since employment peaked in that part of the economy in December 2006. And that was before the bankruptcy of the Wall Street titan, Lehman Brothers; the bailout of the mortgage financiers, Fannie Mae and Freddie Mac; the fire sale of Merrill Lynch to Bank of America; the near disintegration of the insurance giant American International Group; and the government takeover and sale of Washington Mutual.
Health care remained a rare bright spot in the economy, adding 17,000 jobs in September. Mining added 8,000 jobs.
The unemployment rate remained steady at 6.1 percent, but economists said this reflected the fact that the official jobless rate does not count people who have given up looking for work. Over the last year, the unemployment rolls have swelled by 2.2 million, to 9.5 million.
Unemployment rose to 11.4 percent among African-Americans in September, and to 19.1 percent among teenagers, after the worst summer job market on record.
Over all, the number of people officially considered unemployed who lost their jobs — as opposed to those on temporary layoffs or who left work voluntarily — increased by 347,000 in September, to 5.2 million.
In Charlotte, Mich., Sean Schwartz, 26, has been out of a job for nearly two months since his stint as a construction worker ended with the completion of a storage bin for a corn seed plant. His $750-a-week paycheck has been replaced by a $620.10 unemployment check, every other week.
The father of a 2-year-old girl, Mr. Schwartz and his wife — who works at Wal-Mart — are expecting a new baby, a boy, in December. As the weeks pass and his job search turns up little beyond fast-food jobs at a fraction of his previous earnings, they are becoming anxious.
“We’re not getting the bills paid,” Mr. Schwartz said, estimating that they are behind as much as $5,000 on medical bills for his daughter and his wife’s prenatal care.
He thinks about traveling to another state for work, but he does not want to be away for the birth of his son.
“It’s rough,” he said. “There’s nothing really out there.”
People who are out of work are staying jobless longer. More than 21 percent of those receiving unemployment checks have been without work for more than six months, up from 17.6 percent a year ago, according to the Labor Department’s report.
The report amplified the sense that the nation’s economic downturn is hacking away broadly at tens of millions of families — even those that have not suffered the loss of a job.
The number of Americans working part time because their hours were cut or they could not find a full-time job increased by 337,000 in September to 6.1 million — a jump of 1.6 million over the last year.
Over the last year, average weekly wages for some 80 percent of the American work force have risen by a meager 2.8 percent, with the gains more than reversed by increases in the prices of food and fuel.
“This economy is just not creating near enough economic activity to generate job wage or income growth,” said Jared Bernstein, senior economist at the labor-oriented Economic Policy Institute in Washington. “That has serious living standards implications.”
The pressures are worsening. On Friday morning, banks needing to borrow from other banks were having to pay nearly 4 percent more than the Treasury pays in interest on savings bonds, reflecting the unwillingness of financial institutions to part with their dollars as the reckoning from an age of speculative excess goes on. That spread was greater than in the last two recessions and greater than after the 1987 stock market crash.
Even as Washington remained consumed with bailing out troubled financial institutions to try to make money flow more freely, analysts said the jitters would probably remain, with banks continuing to hang on to their dollars and more jobs evaporating from American life.
“The economy is clearly going to get worse before it gets better, with or without the rescue plan,” said Stuart G. Hoffman, chief economist at PNC Financial Services in Pittsburgh. “The rescue plan prevents it from getting much worse, but it’s too late to prevent a recession.”
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