U.S. March Unemployment Probably Rose to 25-Year High (Update1)
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By Bob Willis
April 3 (Bloomberg) -- The U.S.
jobless rate rose in March to the highest level in 25 years and payrolls plunged, exposing the economy to the risk of renewed declines in spending that would scuttle a recovery, economists said before a report today.
Unemployment jumped to 8.5 percent from 8.1 percent in February, according to the
median of 79 estimates in a Bloomberg News survey. The figures may also show employers cut 660,000 workers from staff, bringing total losses since the recession began to 5 million, the biggest slump in the postwar era.
Evaporating jobs and
declining pay mean President Barack Obama’s pledge to create or save 3.5 million jobs through tax cuts and government spending may fall short of what’s needed to revive the world’s largest economy. Federal Reserve Chairman Ben S. Bernanke has conceded joblessness could top 10 percent under a worst-case scenario.
“The unemployment rate is not done rising and the gain in March won’t be the last,” said Stuart Hoffman, chief U.S. economist at PNC Financial Services Group Inc. in Pittsburgh. “With jobs still declining and incomes being squeezed, consumer spending still looks quite weak.”
The job cuts have been spreading from manufacturers like
Johnson Controls Inc. and
Dana Holding Corp., to service providers like
International Business Machines Corp. and even the U.S. Postal Service.
‘Severe Job Cuts’
The last time the unemployment rate was at 8.5 percent was in November 1983, when the economy was recovering from the 1981- 82 recession that pushed the rate to almost 11 percent. Then Fed Chairman
Paul Volcker boosted interest rates to quell soaring inflation following the 1970s fuel crisis.
Today’s employment report will probably show “severe job cuts” in March, White House spokesman
Robert Gibbs said today. Gibbs, speaking aboard Air Force One, said he had not seen the figures.
Labor’s report is due at 8:30 a.m. in Washington. Economists’ payroll estimates ranged from declines of 525,000 to 750,000. Forecasts for the jobless rate spanned from 8.2 percent to 8.7 percent.
A report at 10 a.m. may show service industries shrank last month at a slower pace. The Tempe, Arizona-based Institute for Supply Management’s non-manufacturing
index, which covers almost 90 percent of the economy, probably rose to 42 from 41.6 in February, according to economists surveyed. A reading of 50 is the breakeven point between contraction and growth.
Auto Slump
IBM, the world’s biggest computer-services provider, cut about 5,000 jobs last week, according to a person familiar with the matter. The reduction was in addition to the more than 4,000 jobs already eliminated since January.
The manufacturing slump that began more than a year ago may intensify should General Motors Corp. be forced into bankruptcy, economists said. As many as 1 million additional auto-industry jobs may be lost and the unemployment rate would climb to 11 percent, said
Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York.
The auto slump has already rippled through the industry. Johnson Controls, a maker of car interiors and batteries, said last month it will shut 10 factories and cut about 4,000 jobs. Dana, the truck-axle manufacturer that exited bankruptcy in 2008, said it will boost its payroll reduction to 5,800 this year, 800 more than previously announced.
‘No Assurances’
“We believe we are taking the difficult actions necessary to survive,” Dana Chief Executive Officer John Devine said in a March 16 statement. “There can be no assurances, however, if the global economy deteriorates substantially beyond our planning assumptions.”
Since taking office Jan. 20, Obama has enacted a series of measures aimed at stemming the recession. He signed into law a $787 billion stimulus plan on Feb. 17 that included spending on infrastructure projects to boost hiring.
The Treasury Department is also moving to repair the damaged financial system and lower record foreclosures, while the Fed is flooding markets with cash to boost borrowing and spending.
Bernanke last month said it was “certainly well within the realm of possibility” that unemployment nationwide could rise above 10 percent “for a period.” That’s the assumption being used in a worst-case scenario in tests to determine the health of the banking system, he said.
Bloomberg Survey
its just picking up some steam
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