WASHINGTON (MarketWatch) — U.S. businesses cut jobs at a rapid pace again in December, analysts say, worsening a trend that could produce the largest quarterly job loss since America demobilized its war economy after beating Hitler.
The Labor Department will report on December’s nonfarm payroll report on Friday at 8:30 a.m. Eastern, with economists surveyed by MarketWatch expecting payrolls to fall 500,000 after the 533,000 loss in November.
December’s loss could be much worse, some economists believe. Following the news from payroll firm ADP that its revised private-sector job index fell by 693,000 in December, some economists sharply lowered their forecasts for the payrolls number. Ian Shepherdson, chief domestic economist for High Frequency Economics, said payrolls could fall by 700,000, the worst in 60 years.
Other economists were sticking to their slightly less-horrible forecasts. “Labor market conditions are deteriorating at a rapid clip, and we look for another sizeable drop in payrolls,” said David Greenlaw, an economist for Morgan Stanley, who continued to look for a loss of 450,000. “However, we are discounting the results of the ADP survey.”
For the fourth quarter as a whole, the median expectation is for payrolls to fall by 1.35 million, the worst since 1945. Global business and consumer confidence, already weak, plunged abruptly after the collapse of Lehman Bros. and the rescue of AIG and Fannie and Freddie in September, said Jay Feldman, an economist for Credit Suisse.
For all of 2008, employment likely fell by 2.41 million, the most since 2.75 million jobs were lost in 1945 and exceeding the 2.1 million lost in 1982.
Of course, the workforce is much larger today than it was in 1982 or 1945. As a percentage of employment at the beginning of the year, payrolls likely dropped 1.7% in 2008, the fourth worst year since the war.
The unemployment rate is expected to surge higher to 7.1% from 6.7% in November. It would be the highest unemployment rate since 1993. Analysts surveyed by MarketWatch believe the jobless rate will continue to rise through 2009, peaking above 8%, 9% or even 10% early next year.
As grim as these figures are, they probably understate the collapse of the labor market. Many workers are being forced to cut back their hours; in November, 7.3 million workers had been reduced to part-time hours because of the slowing economy, up 1.6 million in just three months