Joblessness escalating

2.6 million jobs lost in 2008

unemployment rate hits 7.2% in Dec.

January 10, 2009|By Maura Reynolds and Peter Nicholas | Maura Reynolds and Peter Nicholas,Tribune Washington Bureau

With jobs disappearing in numbers not seen since the end of World War II, pressure mounted on Congress and President-elect Barack Obama yesterday to reach agreement on a recovery program to stave off economic catastrophe.

The nation's unemployment rate rose to an eye-popping 7.2 percent in December and brought the total jobs lost for the year to the largest number since 1945, the Labor Department said. More alarming than the bare numbers was the trend line: The economy lost 2.6 million jobs in 2008, but 1.9 million, or about 75 percent of them, vanished in the past four months.

More than a half-million jobs were cut in December - 524,000 in all, the government estimated - and the carnage figures to be even worse when the numbers are nailed down more clearly a month from now.

"No one is expecting it to turn around any time soon," said Harry Holzer, a labor economist with Georgetown University and the Urban Institute. "The labor market lags behind the rest of the economy. Absent any signs of stabilization, we can expect this to continue for some time."

Obama moved quickly to tell Democrats and Republicans alike that he was willing to compromise and make adjustments in his proposed $775 billion stimulus package. But he warned that ideological differences must not stand in the way of quick action.

"There are going to be a whole host of good ideas out there, and we welcome all of them," Obama said during a news conference.

"What we can't do is drag this out," he added.

Economists said the crisis that is driving down employment has several parts. For one thing, ordinary Americans have cut back sharply on spending as they have watched the value of their homes and investments decline. Meanwhile, businesses are trimming hours and payrolls to conserve their resources for spare months ahead.

Moreover, economists say fear is fueling a vicious cycle that could deepen the economic damage - taking pre-emptive action in anticipation of further bad news, which in turn helps assure that the future news will be bad.

"The reason why employers are letting people go is not the traditional reason that employees are costing more than they are bringing in," said Lee Ohanian, an economist at UCLA. "It's the fear factor. The crisis of confidence is having a big impact on employer decisions to hire and invest, and on consumer decisions to purchase. This is the first recession I've seen that has that characteristic."

More than 11 million American workers - roughly one out of 14 - are out of work and looking for new jobs, according to the Labor Department. Another 8 million are working part time even though they want full-time work, and 1.9 million were out of work and were either too discouraged to keep looking or had refocused on school or caring for family.

The last time the unemployment rate topped 7 percent was 1993. In nominal terms, the economy has lost more jobs this year than in any year since 1945, although the population has grown significantly.

Maryland's unemployment rate in November was 5.3 percent, which is more than a 12-year high. A report on the state's jobless numbers, due Jan. 27, is expected to reflect an upward trend.

Local employers have announced layoffs in recent weeks.

Erickson Retirement Communities laid off 260 of 13,000 employees this week, most at the Catonsville corporate headquarters in areas such as construction, development and corporate support functions.

Severstal North America Inc., which owns Baltimore County's Sparrows Point steel plant, said temporary voluntary and involuntary layoffs will continue there and at plants elsewhere.

And Towson toolmaker Black & Decker said it eliminated about 125 jobs in the United States, most of them outside the Baltimore area.

Still, economists generally expect this recession, which began in December 2007, to be the longest since the Great Depression. The unemployment rate is still far from the levels of the Depression, when more than 20 percent of American workers lost their jobs, as well as the shorter but deeper recession of the early 1980s, when unemployment reached 10.8 percent in 1982.

And although momentum is growing for a relief package, some Democrats and Republicans are at odds over just what measures to include and how large they should be. House Minority Leader Rep. John A. Boehner, an Ohio Republican, expressed support for some kind of stimulus, but he said it should emphasize tax cuts, not government-funded jobs programs and other spending.

Baltimore Sun reporters and the Associated Press contributed to this article.

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