Monday, December 8, 2008

Employment 'fell off a cliff,' says CUNA economist

MADISON, Wis. (12/8/08)--The payroll numbers "fell off a cliff in November," as job losses are rising at an increasing rate, according to a credit union industry economist.

Firms are cost cutting in the face of falling revenues, while others are being proactive with job cuts before revenues fall, said Steve Rick, Credit Union National Association (CUNA) senior economist.

Employers slashed 533,000 jobs in November, the Labor Department reported Friday (see chart). The drop was the largest since December 1974. The economy has lost 1.91 million jobs so far this year.

The unemployment rate rose to 6.7% in November--from 6.5% the previous month and the highest level since October 1993. The data indicate a prolonged recession. At 12 months, the downturn already is the longest since the 16-month recession in 1981-82.

Since the beginning of the recession in December 2007, as announced by the National Bureau of Economic Research, the number of unemployed people has increased by 2.7 million. The unemployment rate has risen by 1.7 percentage points.

The number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 2.2 million in November, but up by 822,000 over the past year.

Job losses in November were large and widespread across industries. Employment in manufacturing plunged by 85,000 and has fallen by 604,000 since December. Employment in construction dropped by 82,000 last month and is down 780,000 since peaking in September 2006.

Employment in retail trade fell by 91,000 during November. In one bright spot, health-care employment rose by 34,000 last month, and it has increased by 369,000 over the past 12 months.

"The economy is going through a self-reinforcing downward spiral the likes of which we haven't seen since 1982," Rick said. "This will require massive federal stimulus to reduce the depth, duration and dispersion of the recession. CUNA economists predict unemployment will rise to 9% by this time next year, up from 6.7% today.

"The rise in unemployment will worsen credit conditions for the next two years," he added. "Credit union loan charge-offs as a percentage of total loans could rise to over 1% in 2009, up from the recent five-year average of 0.52%."

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