2008 Job Losses Probably Worst Since 1945: U.S. Economy Preview

Jan. 4 (Bloomberg) — The U.S. economy probably lost more jobs in 2008 than in any year since the end of World War II as firings rippled from homebuilders and automakers to banks and retailers, a government report may show this week.

Payrolls fell 500,000 in December, bringing last year’s decline to 2.4 million, the most since 1945, according to the median estimate of economists surveyed by Bloomberg News ahead of Labor Department figures due Jan. 9. The unemployment rate likely jumped to the highest level since 1993.

The figures will underscore the urgency behind President- elect Barack Obama’s plan to pass a stimulus package that will create jobs and mitigate the recession, already the longest in a quarter century. Other reports may show slumps in housing, manufacturing and service industries deepened at the end of last year, setting the stage for more weakness in 2009.

“We’re continuing to lose massive amounts of jobs,” said Michael Feroli, an economist at JPMorgan Chase & Co. in New York. “The negative momentum carrying over into the first half of 2009 will hold down the economy regardless of policy.”

The jobless rate probably climbed to 7 percent in December from 6.7 percent the prior month, according to the survey median.

Manufacturers probably cut 103,000 workers from payrolls, the report may also show. Factories, which make up 12 percent of the economy, shrank in December at the fastest pace in 28 years as new orders for products from cars to furniture reached the lowest level since records began in 1948, the Institute for Supply Management reported last week.

Auto Bailout

The Bush administration agreed last month to give General Motors Corp. and Chrysler LLC $13.4 billion in federal loans to avert bankruptcy. GM, whose shares slid 87 percent in 2008 — the most among the 30 companies in the Dow Jones Industrial Average – – and Chrysler probably led a drop in December U.S. auto sales that capped the industry’s worst year since 1992, according to the average forecast of analysts surveyed.

The Tempe, Arizona-based ISM’s report on services, covering the rest of the economy, is due Jan. 6. That index likely dropped in December to the lowest level since records began in 1997, the survey showed, as Americans cut back during what may have been the worst holiday shopping season in four decades of record keeping.

Electronic Arts Inc., the second-biggest video-game publisher, last month boosted planned job cuts to 1,000, or 10 percent of its workforce, and said it will consolidate or close at least nine studio and publishing locations.

“Labor-market conditions have deteriorated,” Federal Reserve policy makers said last month when they cut the benchmark interest-rate target to as low as zero. The central bank also has said it will buy debt as the next step in combating the recession, now in its 13th month. Minutes of the Fed’s Dec. 16 meeting will be released on Jan. 6.

Obama’s Plan

Obama has pledged to invest in roads, schools and the U.S. energy network, something akin to the 1950s-era interstate highway construction boom. The package, aiming to create or save 3 million jobs, may be worth as much as $850 billion.

The economy is still weighed down by housing, which is sliding into a fourth year of decline as foreclosures mount, prices drop and some buyers have trouble getting financing.

Fewer Americans signed contracts to buy previously owned homes in November, a report from the National Association of Realtors on Jan. 6 may show. A decline would be the fourth in the past five months.

Tomorrow, a Commerce Department report may show construction spending fell 1.3 percent in November after dropping 1.2 percent the prior month, according to the median forecast.

Another Commerce report the following day may show orders placed with American factories fell 2.3 percent in November after a 5.1 percent October drop that was the biggest in eight years, the survey showed.

                         Bloomberg Survey

                        Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
Construct Spending MOM%   1/5       Nov.     -1.2%     -1.3%
ISM NonManu Index         1/6       Dec.      37.3      37.0
Factory Orders MOM%       1/6       Nov.     -5.1%     -2.3%
Pending Homes MOM%        1/6       Nov.     -0.7%     -1.0%
Initial Claims ,000's     1/8      Jan. 3     492       545
Cont. Claims ,000's       1/8     Dec. 27     4506      4483
Nonfarm Payrolls ,000's   1/9       Dec.      -533      -500
Unemploy Rate %           1/9       Dec.      6.7%      7.0%
Manu Payrolls ,000's      1/9       Dec.      -104      -103
Hourly Earnings MOM%      1/9       Dec.      0.4%      0.2%
Hourly Earnings YOY%      1/9       Dec.      3.7%      3.6%
Avg Weekly Hours          1/9       Dec.      33.5      33.5
Whlsale Inv. MOM%         1/9       Nov.     -1.1%     -0.7%

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

Last Updated: January 4, 2009 00:01 EST
By Shobhana Chandra

Source: Bloomberg

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