598,000 Jobs Lost as Jobless Rate Hit 7.6% in January

As a reminder of the urgency of help for working families, the New York Times reports on February 7, 2009 that the

country moved into its second year of uninterrupted job losses last month, with companies shedding another 598,000 jobs — the most since December 1974 — and the unemployment rate moving up to 7.6 percent, the Labor Department reported on Friday.

While the Congress dithers over political gains, the Republicans keep pressing for tax help for the rich, jobs have become an endangered species in the US economic environment.

Economists had forecast a loss of 540,000 jobs and a unemployment rate of 7.5 percent. The jobless rate is at its highest since September 1992.

Job losses were once again spread across both manufacturing and service industries, reinforcing the picture of an economy that is contracting at its fastest pace in decades.

Employers in the United States have shed jobs every month since January 2008, for an aggregate decline in payroll employment of about 3.2 million.

The Labor Department also revised its numbers from December, saying that the economy lost 577,000 jobs compared with an initial reading of a loss of 524,000.

It is not adequate to the challenge to talk about bailouts that don't address the day to day crisis in the lives of working families by halting foreclosures and evictions for any reason, by extending unemployment benefits to all who are unemployed regardless of the reason, by insuring that unemployment benefits provide a living wage, and by stopping businesses from taking bailout funds and using them to protect their own limited interests at the expense of their employees and the communities in they operate and to whom they provide services.

As the NYT reports,

“Businesses are panicked and fighting for survival and slashing their payrolls,” said Mark Zandi, chief economist at Moody’s Economy.com. “I think we’re trapped in a very adverse, self-reinforcing cycle. The downturn is intensifying, and likely to intensify further unless policy makers respond aggressively.”

The idea that this is a self-reinforcing cycle highlights once again the structural nature of the crisis and the demands of the time to think outside the capitalist context and look at nationalization and other mechanisms to address the issues facing working families today.

Even as the concrete realities of the time tend to raise the question of socialism, so the media have hightened their endless ranting against the socialist alternative. As this article is being written NPR is airing a piece on the role of anti-communist Lech Walesa and Solidarity in Poland. The report is interviewing all sorts of anti-communist people from Eastern Europe on how "capitalism" is normal; effectively arguing that its better to starve under capitalism than eat under communism.

This does not address the real situation here in the United States today.

For the last several months, analysts said, the United States has increasingly been trapped in a vicious circle of slumping consumer demand, falling business investment, mounting losses in the banking system, and rising unemployment, which was 7.2 percent in December.

The problems are not going to disappear due to tax cuts or other magic pills that the henchmen of capital might propose; solutions that continue the trend toward the greater and greater disproportionate distribution of wealth that underlies the current crisis.

As a result, the monthly pace of job losses shot up to about 500,000 a month for the last three months of 2008. Economists see no hint that the bottom has been reached.

Most economic forecasters had been expecting a loss of roughly 500,000 jobs in January, at least as bad as in December, because other indicators of the job market had been trending down as well. Last week, the number of Americans filing first-time jobless claims reached a 26-year high, with 626,000 filling out initial applications.
Major retailers, rocked by one of the worst holiday shopping seasons in memory, have been shutting stores and laying of armies of workers in recent weeks. On Thursday, the nation’s retailers reported that sales fell 1.6 percent in January, the fourth consecutive month of steep sales declines.

And in sign that the country’s slowdown continues to reach beyond its borders, Canada, America’s largest trading partner, reported Friday that its unemployment rate jumped to 7.2 percent in January, from 6.7 percent in December.

In Washington, Friday’s gloomy job report put more pressure on Congress to pass an economic stimulus bill. The House passed a bill last week that would provide more than $800 billion in spending and tax cuts. In the Senate, still bogged down by objections from Republicans, lawmakers were hoping to be able to muster enough votes to pass a measure on Friday

For comparison, the unemployment rate was 4.9 percent in January 2008. But some analysts contend that the current unemployment rate understates the labor market’s problems because the percentage of adults participating in the labor force has slumped in recent years, and those people are not listed as “unemployed.”

Peter Morici, an economist at the University of Maryland, estimated that if the labor force participation rate today was as high as it was when President Bush took office, the unemployment rate would be 9.4 percent.

Ian Shepherdson, chief North American economist for High Frequency Economics in Valhalla, N.Y., said the government had become the only source of energy left to break the cycle of slumping demand for goods and falling production.

“The public sector needs to act,” Mr. Shepherdson wrote in a note to clients. “It needs to prevent an endless spiral of attempts to increase saving, leading to reduced spending, leading to reduced incomes, leading to further attempts to raise savings, and so on.”

“We remain firmly of the view that the package now in Congress is the bare minimum required to slow the shrinkage of the economy over the next year.”

Many economists expect that the economy will continue to contract until July at the very least, but at a slowing pace in the second quarter. That would make it the longest recession since the 1930s, outlasting the two record-holders, the mid-1970s and early 1980s downturns. Each of these recessions lasted 16 months. The current recession, which started in December 2007, would reach that milestone in April.

The Federal Reserve continues to pump money into the financial system at a furious pace. Since September, the central bank has more than doubled its reserves, from $900 billion to more than $2 trillion, by literally creating new money.

The Fed has used some of that money to help bail out financial institutions, from Citigroup and Bank of America to the American International Group.

It has been pumping hundreds of billions of dollars into new lending programs, stepping in for banks and other financial institutions to buy up a widening array of corporate debt. Later this month, the Fed will begin a $200 billion program, in conjunction with the Treasury, to finance consumer debt ranging from car loans and credit card debt to student loans.

But analysts say that the big problem is not a shortage of money, but a shortage of demand for products by businesses and consumers. As a result, banks are overloaded with excess reserves, made available by the Fed, which they are often simply parking at the Fed.