Sunny Yang, left, a masters degree student from Shanghai and employed banker in New York City, speaks with World Bank representative Roberto Amorosino about opportunities for unemployed friends of his during a career fair at Columbia Univeristy Friday, Nov. 7, 2008 in New York. The U.S. unemployment rate bolted to a 14-year high of 6.5 percent in October as another 240,000 jobs were cut, far worse than economists expected and stark proof the economy is deteriorating at an alarmingly rapid pace. (AP Photo/Julie Jacobson)
WASHINGTON (AP) — The nation’s jobless ranks zoomed past 10 million last month, the most in a quarter-century, as piles of pink slips shut factory gates and office doors to 240,000 more Americans with the holidays nearing. Politicians and economists agreed on a painful bottom line: It’s only going to get worse.
The unemployment rate soared to a 14-year high of 6.5 percent, the government said Friday, up from 6.1 percent just a month earlier. And there was more grim news from U.S. automakers: Ford Motor Co. and General Motors Corp., American giants struggling to survive, each reported big losses and figured to be announcing even more job cuts before long.
Regulators, meanwhile, shut down Houston-based Franklin Bank and Security Pacific Bank in Los Angeles on Friday, bringing the number of failures of federally insured banks this year to 19.
The Federal Deposit Insurance Corp. was appointed receiver of Franklin Bank, which had $5.1 billion in assets and $3.7 billion in deposits as of Sept. 30, and of Security Pacific Bank, with $561.1 million in assets and $450.1 million in deposits as of Oct. 17.
Barack Obama, in his first news conference as president-elect, said the nation was facing the economic challenge of a lifetime but expressed confidence he could deal with it.
“Immediately after I become president, I’m going to confront this economic crisis head on by taking all necessary steps to ease the credit crisis, help hardworking families, and restore growth and prosperity,” he said after meeting with economic advisers in Chicago. “I’m confident a new president can have an enormous impact.”
Wall Street revived somewhat after two days of big losses. The Dow Jones industrials rose 248 points.
Still, the Labor Department’s unemployment report provided stark evidence that the economy’s health was deteriorating at an alarmingly rapid pace. The jobless rate was 4.8 percent just one year ago.
About 10.1 million people were unemployed in October, the most since the fall of 1983. More people have jobs now, since the population has grown, but it’s still a staggering jobless figure. With employers slashing jobs every month so far this year, some 1.2 million positions have disappeared, over half in the past three months alone.
Like Obama, President Bush expressed confidence that things would get better: “Our economy has overcome great challenges before, and we can be confident that it will do so again.”
But economists were much less upbeat than politicians.
“There is no light at the end of the tunnel, and the outlook is pitch black,” said Richard Yamarone, economist at Argus Research.
And Bernard Baumohl, chief global economist at the Economic Outlook Group, said the report “depicts an economy still in free fall and without a safety net anywhere in sight.”
All the economy’s woes — a housing collapse, mounting foreclosures, hard-to-get credit and financial market upheaval — will confront Obama when he assumes office in January. Unemployment is expected to keep rising during his first year in office, while record budget deficits will crimp his domestic agenda.
October’s jobless rate was the highest since March 1994 and now has surpassed the 6.3 percent 2003 high after the most recent recession. The government also said job losses were worse than first reported for the preceding two months, 284,000 rather than 159,000 in September and 127,000 rather than 73,000 in August.
Many economists believe the unemployment rate will climb to 8 percent or 8.5 percent by the end of next year before slowly drifting downward. Some think unemployment could even hit 10 or 11 percent — if an auto company should fail.
In any case, the rate is likely to move higher even if the economy is on somewhat stronger footing by the middle of next year as some hope. That’s because companies won’t be inclined to ramp up hiring until they feel certain that a recovery has staying power.
Joshua Shapiro, chief economist at consulting firm MFR Inc., said another reason the unemployment rate can keep climbing — even after a recession is over — is because people tend to flock back to the labor market when they sense their job prospects might be better. “It takes (people) awhile to figure out, ‘Hey, there’s jobs out there,'” Shapiro said.
In the 1980-1982 recession — considered the worst since the Great Depression in terms of unemployment — the jobless rate rose as high as 10.8 percent in late 1982 just as the recession ended, before inching down.
Friday’s report was worse than analysts had expected. They had been forecasting a jobless rate of 6.3 percent with payrolls falling about 200,000.
Factories, including auto makers, construction companies, especially home builders, retailers, mortgage bankers, securities firms, hotels and motels and educational services, all cut jobs. As did temporary help firms — a barometer of future hiring. All those losses more than swamped the few gains elsewhere, including in the government, health care and in accounting and bookkeeping.
Private companies cut 263,000 jobs, the most since the country was beginning to emerge from the 2001 recession. It marked the 11th straight month of such reductions.
The grim numbers spurred calls from Democrats on Capitol Hill to provide fresh relief. House Speaker Nancy Pelosi said Democrats, in a lame-duck session later this month, will push to enact another economic stimulus package of around $100 billion, possibly including provisions to create jobs through big public works projects.
Obama said if the session doesn’t bring passage, the measure will be his first priority as president in January.
He has called for about $175 billion in new stimulus spending, including money for roads, bridges and aid to hard-pressed states. He wants a rebate of $500 for individuals, $1,000 for families and a new $3,000 tax credit for businesses for each new job created.
Workers with jobs saw only modest wages gains in October. Average hourly earnings rose to $18.21, a 0.2 percent increase from the previous month. Over the past year, wages have grown 3.5 percent, but paychecks aren’t stretching far because high food, energy and other prices have propelled overall inflation at a faster pace.
The economy has lost its footing in just a few months. It contracted at a 0.3 percent pace in the July-September quarter, signaling the onset of a likely recession. It was the worst showing since the 2001 recession, and reflected a massive pullback by consumers.
As consumers watch jobs disappear, they’ll probably retrench even further, spelling more trouble. Analysts say the economy is still shrinking in the current October-December quarter and will contract further in the first quarter of next year. All that more than fulfills a classic definition of a recession: two straight quarters of contracting economic activity.
“The U.S. recession is deepening,” said Michael Gregory, economist at BMO Capital Markets Economics. The final quarter of this year is getting off to a “particularly ugly” start.
AP Economics Writer Christopher S. Rugaber contributed to this report.
Jeannine Aversa, AP Economics Writer
Saturday November 8, 2008, 7:07 am EST