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Jobless picture gets gloomier
11/03/2001
WASHINGTON – The Sept. 11 terrorist attacks are having dramatic consequences
for thousands of Americans: They're losing their jobs.
And those losses are piling up faster than experts expected. The Labor
Department reported Friday that employers cut 415,000 jobs in October, pushing
up the unemployment rate a half point to 5.4 percent. Economists said employers in a broad sweep of industries moved swiftly and
dramatically to trim payrolls. Although government experts said there was no way
to isolate the effects of the terrorist attacks, private analysts attributed up
to half the losses to the tragedies. "It certainly is a very clear sign of how much damage the shock of September
11th inflicted on the economy," said Lynn Reaser, chief economist at Banc of
America Capital Management Inc. in St. Louis. October marked the worst month for job losses since May 1980. Wall Street's consensus forecast was for the jobless rate to edge up only to
5.2 percent, though that still would have been a sharp jump from September's 4.9
percent rate. But the stock market took the worse-than-expected news in stride, as the Dow
Jones industrial average and the Standard & Poor's 500 Index made narrow
gains. Analysts expect the unemployment rate to top 6 percent in the coming months.
The job-cutting pace is expected to slow, but losses of 200,000 a month are
still likely. "The real concern is that this will hurt confidence," said Joel Naroff, an
economic consultant in Philadelphia. If the jobless rate rises to 6 percent, he
said, it would translate into pink slips for another 750,000 workers. Experts continue to struggle with understanding where the economy is headed.
The Sept. 11 attacks are unprecedented, so it's difficult to know for certain
the depth and breadth of the unfolding recession and when a recovery might
begin, they say. "Everybody was bracing for a report like this, even though we were not all
forecasting it," said Jim Glassman, an economist at J.P. Morgan Chase & Co.
in New York. "It is hard to know how much of it was from the jolt of the
terrorist attacks and how much was underlying momentum in the economy." The pace of October's job losses also refocused attention on Washington. Federal Reserve policymakers meet Tuesday, and many analysts expect the
central bank to slash a key interest rate another half-point to 2 percent. If
Federal Reserve Chairman Alan Greenspan and his colleagues oblige, the interest
fee that banks charge one another on overnight loans would slide to a 40-year
low. The Fed has cut interest rates nine times this year, including two half-point
cuts after the Sept. 11 attacks. Analysts disagree about whether the Fed will choose a half-point cut to 2.5
percent or just a quarter point. But there is consensus in Washington and on
Wall Street that the central bank would take action to bolster consumer and
market confidence. Although economists usually prefer to see economic stimulation come from the
Fed in the form of lower interest rates, some say the extraordinary challenges
mean it's time for Congress to quickly assemble a stimulus package. "Congress should get its act together," said Diane Swonk, chief economist at
Bank One Corp. in Chicago. "If we are fighting a war abroad, why are we fighting
one at home? This is not a time for partisan politics." Meeting at the White House on Friday with his top economic advisers,
President Bush renewed calls for Congress to put aside partisan differences and
approve a package of new spending and tax cuts. "It's not good news for America," Mr. Bush said of the employment report. The
president said the terrorist attacks have "threatened the livelihoods of
thousands of American workers." The report showed that alongside the expected substantial job losses in the
airline, hotel, and restaurant industries was a surprisingly swift and deep
round of cuts across a host of other businesses. "The layoffs are very broad. That suggests next month will be bad as well,"
said David Wyss, chief economist at Standard & Poor's Inc. in New York. October's staggering job losses came on top of 213,000 lost jobs in
September. Since employment peaked in March, overall job losses have totaled
887,000. The transportation and public utilities category lost 55,000 jobs in October.
Services shed 111,000 jobs. Retailers trimmed 81,000. Factories, already locked
in a yearlong downturn, slashed 142,000 more jobs. Other figures underscored the labor market's increasing weakness. The number of "marginally attached" workers, or those who want jobs but have
not looked for work in a month, rose to 1.4 million, up from 1 million a year
ago. Among those are "discouraged workers," or those who have not looked for work
because they believe there are no jobs. Their ranks swelled to 330,000, up from
230,000 a year ago. And the number of part-time workers who would prefer to be working full time
rose by 275,000 in October to 4.5 million. Since August, 1.1 million workers
have joined this category of part-time workers as employers have cut full-time
positions. The employment report suggested that factories are drastically curtailing
production. The average workweek for dropped 0.1 hour to 34 hours. That reflects
job cuts and reduced hours for those who remain. If there is a bright spot in any of this, it may be that businesses are
weathering the downturn by selling off inventories. Because they're not yet placing fresh factory orders, there should be an
eventual surge – prompting manufacturers to increase production and eventually
start hiring again, economists say. The experts note that auto sales have remained strong on the strength of
zero-percent financing offers. Economists are hoping that low interest rates
will do the same for the rest of the economy by early next year. "We do know that there are some pretty strong economic factors that will
eventually overwhelm terrorism," said Bank One's Ms. Swonk, noting that other
countries like Israel have had thriving economies while faced with violence at
home. "But nobody knows how long it will take to make that transition."