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Job losses at 10-year high
10/06/2001
By Robert Dodge
The Dallas Morning News
WASHINGTON – The economy was deteriorating at a faster-than-expected clip even before the terrorist attacks, as employers trimmed 199,000 workers from their payrolls in September.
It marked the worst month for job losses in a decade, the Labor Department reported Friday, though statistical aberrations kept the unemployment rate unchanged at 4.9 percent.
Looking ahead, private analysts offered a gloomy scenario: The unemployment rate will spike above 5 percent in October as the government's surveys account for workers who lost their jobs immediately after Sept. 11.
And, the experts said, the jobless rate could top 6 percent by next spring.
"It is not a good picture at all," said Joel Naroff, a Philadelphia economic consultant.
President Bush seized on the report to urge quick congressional approval of a $60 billion stimulus package. With a similar sum already being spent on disaster aid, Mr. Bush said, the stimulus plan should focus on lowering taxes.
"In order to stimulate the economy, Congress does not need to spend any more money, they need to cut taxes," said Mr. Bush, flanked at a Rose Garden appearance by Vice President Dick Cheney, Treasury Secretary Paul O'Neill, senior economic adviser Lawrence Lindsey and chief economist Glenn Hubbard.
Mr. Bush proposed:
• Accelerating the reductions in marginal tax rates contained in his 10-year, $1.35 trillion tax package enacted last spring.
• Cutting taxes for low- and moderate-income workers whose biggest tax burden is the Social Security payroll tax. Democrats have called for tax rebates for about 30 million households that did not qualify for the rebates handed out this year.
• Reducing corporate taxes by allowing faster write-offs for new business equipment. The president also proposed eliminating the corporate alternative minimum tax, which requires businesses with big deductions to pay some taxes.
Friday's Labor Department report underscored the breadth and depth of the nation's economic slowdown.
September's 199,000 lost jobs was a 10-year high – a mark last eclipsed in February 1991, when the economy shed 259,000 jobs. The Persian Gulf War was under way at the time.
Experts say this month will be even worse: The consensus forecast is for an additional 400,000 jobs to be cut in October. Such losses are expected to push the unemployment rate past 5 percent.
Jobs were lost in September across a broad swath of the economy, from retailing and services to manufacturing and transportation.
The battered manufacturing sector, which has been losing jobs since August 2000, gave up 93,000 more last month. And that came on top of 146,000 trimmed from payrolls in August.
"It's hard to imagine that things could be any worse in manufacturing," Mr. Naroff said.
The services industry saw employment fall by 41,000 jobs. That sector was among the economy's most robust during the 1990s boom.
Transportation payrolls fell 7,000. Much bigger losses are expected. The 10 largest U.S. airlines alone have announced job cuts totaling 89,500.
Lull will last a while
And looking forward, economists note that it's important to remember that employment trends generally lag the economy. That means businesses only begin to rehire workers once growth has gotten fully under way.
"You will see layoffs continuing through the first quarter of next year," said David Wyss, chief economist at Standard & Poor's Inc. in New York.
In normal times, economists say, the Federal Reserve Board's nine interest rate cuts this year should be enough to instill confidence in an economic recovery. But the Sept. 11 attacks have left consumers, businesses and investors fretting over other factors besides the Fed.
"People are more focused on political uncertainty, with military operations and how we will recover from this shock," said Jim Glassman, an economist at J.P. Morgan Chase & Co. in New York. "We are in limbo because we do not know what it will take to neutralize the terrorist threat."
Mr. Wyss added: "The main thing that will give people confidence ... is that they feel safe on the street."
Legislative wrangling
Looking to bolster consumer confidence, key lawmakers say they hope to finish work on the stimulus package in two to three weeks.
Although congressional leaders have presented a bipartisan facade, they have been wrestling privately over the mix of tax cuts vs. spending. Republicans favor tax cuts while Democrats favor more spending.
Clint Stretch, who follows tax legislation for the Deloitte & Touche accounting firm, said the president's statement Friday was important because it set out some parameters for the package. Despite some confusion, Mr. Stretch said, the package was coming together rapidly.
"The political system is trying to digest the wants of interest groups, process ideas and catch up with itself," he said. "Usually, when we pass a tax cut, we've been talking about it for a year."
Economists have questioned some of the provisions but said it is important that political leaders signal that they are addressing the economic fallout from the terrorist attacks.
"There is a lot in the stimulus package that is dumb," Mr. Wyss said. "But it is more important to get something done than to dither about it. Even if it is not exactly right, at least it is in the right direction."