U.S. Job-Market Fall in 2008 May Be Biggest Since ‘45 (Update1)

U.S. Job-Market Fall in 2008 May Be Biggest Since ‘45 (Update1)
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By Shobhana Chandra

Jan. 9 (Bloomberg) -- The U.S. probably lost 525,000 jobs in December, capping the biggest collapse in employment since the end of World War II, economists said before a report today.

The projected decline, based on the median estimate of 73 economists surveyed by Bloomberg News, would bring last year’s payroll drop to 2.4 million, the most since 1945. The unemployment rate likely jumped to a 15-year high of 7 percent.

The outlook for 2009 is no brighter as retailers from Wal- Mart Stores Inc. to Macy’s Inc. slash profit forecasts and manufacturers including Alcoa Inc. cut output and staff. The figures are likely to intensify pressure on U.S. lawmakers to speed President-elect Barack Obama’s proposed fiscal stimulus through Congress in an effort to save or create 3 million jobs.

“The labor market is clearly not functioning at all,” said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina. “This will be a big hit to consumer spending and confidence. It suggests a very long, challenging recession.”

The report, the last one under President George W. Bush’s watch, is due from the Labor Department at 8:30 a.m. in Washington. Economists’ estimates for December ranged from job losses of 350,000 to 750,000. Forecasts for the unemployment rate ranged from 6.5 percent to 7.1 percent.

The yield on the 10-year Treasury note fell two basis points to 2.43 percent by 7:31 a.m. in New York, according to BGCantor Market Data. Standard & Poor’s 500 Index futures retreated 0.2 percent, indicating the benchmark index for U.S. equities will extend this week’s 2.4 percent slide.

Obama Plan

The projected decline in today’s report would be the 12th consecutive loss, and follow a 533,000 November decrease that was the largest in three decades. The economy created 1.1 million jobs in 2007.

Obama is pressing for a stimulus plan of about $775 billion, including tax cuts and spending on everything from roads and schools to the energy network. Yesterday he called for “dramatic action as soon as possible” to help pull the world’s largest economy out of a slump that’s into its second year. “If nothing is done, this recession could linger for years,” Obama said in Fairfax, Virginia.

With today’s report, the Labor Department will also revise figures from its household survey, which includes the unemployment rate, going back five years. Benchmark revisions to the payroll figures will be announced in February.

Fed Projections

Federal Reserve staff last month cut their projections for gross domestic product and the job market, stating the unemployment rate was “likely to rise significantly into 2010,” according to minutes of policy makers’ December meeting.

Reports this week indicated payroll losses accelerated in December. ADP Employer Services estimated companies cut the most jobs since its records began in 2001, and Challenger, Gray & Christmas Inc., a Chicago-based placement firm, said announced firings rose 275 percent from December 2007.

Analysts said the economy is in danger of a reinforcing cycle of rising unemployment and declining household spending, what policy makers call a negative feedback loop, which is difficult to snap once it’s begun.

Wal-Mart, the world’s biggest retail chain, yesterday said fourth-quarter profit will miss its earlier forecasts after sales rose less than analysts anticipated. Macy’s said December revenue slipped 4 percent and announced it would close 11 properties.

Sales Drop

Sales at stores open at least a year dropped 2.2 percent in the last two month months of 2008, the biggest holiday-season decline since the International Council of Shopping Centers started keeping records in 1970, the group said yesterday.

Economists also projected manufacturers cut 100,000 workers last month, according to the survey median. Factories, which make up 12 percent of the economy, shrank in December at the fastest pace in 28 years, Institute for Supply Management figures showed.

“These are extraordinary times, requiring speed and decisiveness to address the current economic downturn,” Klaus Kleinfeld, chief executive officer of Alcoa Inc., said in a Jan. 6 statement announcing 13,500 job cuts worldwide. The world’s largest aluminum producer said it will trim an additional 1,700 contractor positions and froze hiring and salaries in some areas.

Some companies have taken other steps to lower costs. Caterpillar Inc., the world’s largest maker of construction equipment, will put 814 workers on an “indefinite” layoff, shipper FedEx Corp. cut the pay of Chief Executive Officer Fred Smith and other employees, and auto-parts supplier Visteon Corp. said it will trim its workweek and some salaries.



Bloomberg Survey

================================================================
Nonfarm Unemploy Manu Hourly
Payrolls Rate Payrolls Earnings
,000’s % ,000’s MOM%
================================================================

Date of Release 01/09 01/09 01/09 01/09
Observation Period Dec. Dec. Dec. Dec.
----------------------------------------------------------------
Median -525 7.0% -100 0.2%
Average -536 7.0% -104 0.2%
High Forecast -350 7.1% -75 0.3%
Low Forecast -750 6.8% -180 0.1%
Number of Participants 73 71 18 52
Previous -533 6.7% -104 0.4%
----------------------------------------------------------------
4CAST Ltd. -570 7.1% --- 0.2%
Action Economics -480 7.1% -110 0.2%
AIG Investments -551 7.0% --- 0.3%
Aletti Gestielle SGR -580 7.0% -100 ---
Ameriprise Financial Inc -510 7.0% -115 0.2%
Argus Research Corp. -567 6.8% -80 0.3%
Banc of America Securitie -475 7.0% --- 0.2%
Bancolombia SA -620 6.9% --- ---
Bank of Tokyo- Mitsubishi -636 7.1% --- 0.2%
Barclays Capital -500 7.0% --- 0.1%
BMO Capital Markets -600 7.0% --- 0.2%
BNP Paribas -650 7.0% --- 0.2%
Briefing.com -520 7.0% --- 0.2%
Calyon -600 6.9% --- 0.2%
CIBC World Markets -500 7.0% --- 0.2%
Citi -425 7.1% --- 0.2%
ClearView Economics -450 6.9% -75 0.2%
Commerzbank AG -550 7.1% --- 0.2%
Credit Suisse -475 7.0% --- 0.1%
Danske Bank -502 --- --- ---
DekaBank -485 7.0% --- 0.2%
Desjardins Group -400 6.9% --- 0.2%
Deutsche Bank Securities -600 7.0% --- ---
Dresdner Kleinwort -490 7.0% -125 0.2%
DZ Bank -520 7.0% --- ---
Exane -550 7.0% --- 0.2%
First Trust Advisors -578 6.9% -120 0.3%
Fortis -430 6.9% --- ---
FTN Financial -550 6.9% --- 0.3%
Gain Capital -615 7.0% --- ---
Goldman, Sachs & Co. -550 7.1% --- 0.2%
Helaba -350 6.8% --- 0.2%
Herrmann Forecasting -572 7.1% --- 0.2%
High Frequency Economics -600 7.0% --- 0.2%
Horizon Investments -600 7.1% --- ---
HSBC Markets -530 6.9% --- ---
IDEAglobal -500 6.9% -110 0.3%
IHS Global Insight -625 7.1% --- 0.2%
Informa Global Markets -500 7.0% -100 0.2%
ING Financial Markets -750 7.1% -180 0.2%
Insight Economics -525 6.9% --- 0.2%
Intesa-SanPaulo -430 6.9% --- ---
J.P. Morgan Chase -500 7.0% --- 0.2%
Janney Montgomery Scott L -540 7.1% --- ---
Lande*****ank Berlin -500 6.9% --- 0.1%
Maria Fiorini Ramirez Inc -600 7.0% --- 0.2%
Merrill Lynch -550 7.1% --- 0.1%
MF Global -645 --- --- ---
Moody’s Economy.com -500 6.9% -80 0.2%
Morgan Keegan & Co. -578 7.1% --- ---
Morgan Stanley & Co. -450 7.0% --- 0.3%
National City Bank -554 6.9% --- 0.1%
Natixis -500 7.0% --- 0.2%
Newedge -510 7.0% -80 ---
Nomura Securities Intl. -475 7.0% -100 0.2%
Nord/LB -475 7.0% -100 ---
PNC Bank -450 7.1% -90 0.2%
RBC Capital Markets -460 7.1% --- ---
RBS Greenwich Capital -500 7.0% --- 0.2%
Ried, Thunberg & Co. -600 7.1% --- ---
Schneider Foreign Exchang -515 7.1% --- 0.1%
Scotia Capital -750 7.1% --- 0.2%
Societe Generale -500 7.1% --- 0.2%
Standard Chartered -600 7.1% --- ---
Stone & McCarthy Research -475 7.0% -100 0.3%
TD Securities -600 7.1% --- ---
Thomson Financial/IFR -505 7.0% --- 0.2%
UBS Securities LLC -525 7.1% --- 0.2%
University of Maryland -480 7.0% -105 0.2%
Wachovia Corp. -550 7.0% --- ---
Wells Fargo & Co. -600 7.1% -110 0.2%
Westpac Banking Co. -600 6.9% --- ---
Wrightson Associates -500 7.1% --- 0.3%
================================================================

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