The October employment report was about as bad a report as could be. It is now very clear that firms are laying off workers and clinging to any productivity that they can muster up (See this post for my more sanguine outlook based on U.S. productivity).
According to the Bureau of Labor Statistics, nonfarm payroll fell by another 240,000 jobs in October. The unemployment rate surged by 0.4% to 6.5% and confirmed the payroll report with a 297,000 drop in employment. The labor market is weak, very weak, and labor income is suffering substantially.
The ugliest bit of news came from the sharp declines in the payroll reports for both August and September; in total, 179,000 jobs were lost in excess of what was originally reported. All signs point to a weaker-than-expected labor market.
So far, this job cycle has produced 1.2 million aggregate jobs lost, which 450,000 jobs shy of the accrued job loss during the 2001 recession. And with the recession just getting underway, the peak of job loss has not yet occurred and likely will not for a while.
The job loss was broad based – covering both goods producing and service producing sectors: manufacturing cut another 90,000 jobs; construction another 49,000 jobs (really, how much lower can this get with no new projects?); automotive dealers cut 20,300 jobs; department stores cut 18,000 jobs; administrative jobs fell by 59,700; food and lodging slashed 19,400 jobs(people are eating out less and staying home); education cut 11,200 jobs, its second cut since September. There were few numbers greater than zero, but health care added 31,900 jobs, and the governmnet is still hiring (+23,000), but below its monthly average.
Pelosi is correct to consider a fiscal stimulus sooner, rather than later. Eventually the economy will pick up with the massive expansionary policies on the part of the Fed and Congress. However, get ready for a rocky ride – nobody’s job is safe in the near term. And although times will be tough into 2009, I still believe in the fundamentals of the U.S. economy; this will turn around.