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Economy Won't Be Healing Anytime Soon

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The Associated Press

Published: November 8, 2008

WASHINGTON - The nation's unemployment rate is at a 14-year high, General Motors reported a massive third-quarter loss and says it may run out of cash next year, and Ford is planning more job cuts after burning through billions of its own.

The evidence continues to roll in that the U.S. economy is in a recession.

Another 240,000 jobs were cut last month as the jobless rate zoomed to 6.5 percent from 6.1 percent in September, the Labor Department said Friday. Last month's rate matched the reading from March 1994.

Unemployment has now surpassed the high seen after the last recession in 2001. The jobless rate peaked at 6.3 percent in June 2003.

Meanwhile, General Motors Corp. said it lost $2.5 billion in the third quarter and warned that it could run out of cash in 2009. The automaker also said it has suspended talks to acquire Chrysler, and that its cash burn for the quarter accelerated to $6.9 billion due to the severe U.S. auto sales slump.
Ford Motor Co. said it lost $129 million in the third quarter, went through $7.7 billion in cash, and will cut about 2,260 more jobs in its North American salaried work force.

On the crucial jobs front, the situation is likely to move from bad to worse next year. October's decline marked the 10th straight month of payroll reductions, and government revisions showed that job losses in August and September turned out to be much deeper. Employers cut 127,000 positions in August, compared with 73,000 previously reported. A whopping 284,000 jobs were axed in September, compared with the 159,000 jobs first reported.

So far this year, a staggering 1.2 million jobs have disappeared.

Obama Meets With Advisers

Racing to assemble his new Democratic Cabinet, President-elect Barack Obama will huddle with economic advisers later on Friday. His team has been in close contact with the Bush administration to pave the way for a smooth hand-off of power.

Many expect the jobless rate to climb to 8 percent, possibly higher, next year. In the 1980-1982 recession, the unemployment rate rose as high as 10.8 percent before inching down.

Stressed consumers are cutting back on their shopping and trying to trim their debt. Economists believe consumers cut back on borrowing in September, as another report to be released Friday is expected to show.

Nearly half a million Americans filed new claims for unemployment benefits in the last week alone, and skittish shoppers handed many retailers their weakest sales since 1969, government reports out Thursday showed.

The Labor Department said new filings for jobless benefits clocked in at 481,000, a dip from the previous week but a still-elevated level that suggests companies are resorting to big layoffs to cope with the economy's downturn.

Stimulus Package Possible

To provide fresh relief, House Speaker Nancy Pelosi said Democrats, in a lame-duck session later this month, would push to enact another round of economic stimulus to provide more relief, which could include extending jobless benefits.

A $168 billion package, including tax rebates for people and tax breaks for businesses, was rolled out earlier this year. Short of a package of $100 billion or more, the House could press the Senate to pass a smaller $61 billion measure that would bankroll public works projects to help generate new jobs and would extend unemployment benefits.

Companies are begging for help, too. The leaders of General Motors, Ford and Chrysler and the president of the United Auto Workers union came to Capitol Hill to discuss billions of dollars more in financial help.

Reeling from layoffs and watching their wealth shrink, shoppers turned extra frugal last month and sent sales at many retailers down sharply.

Michael P. Niemira, chief economist at the International Council of Shopping Centers, summed up the situation as "awful."

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