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Out of Work
More people are getting pink slips as employers across U.S. cut back
AP Photo
The Daimler Chrysler plant in Newark, Del., will close at the end of the year as the company shifts away from SUVs.
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Published: October 24, 2008
WASHINGTON - Unemployment claims, already well into recession territory, are rising even faster than expected, leading economists to warn yesterday that the worst is yet to come.
As the Labor Department released bleak new numbers on the job market, Goldman Sachs, Chrysler and Xerox all announced that they were cutting workers by the thousands, adding to the woes of an economy beset by tighter credit and wobbly banks.
The government said that new applications for unemployment insurance rose 15,000 last week to a seasonally adjusted 478,000, above analysts' estimates of 470,000. Jobless claims above 400,000 are considered a sign of recession.
The White House, in unusually stark language, acknowledged that the economy is going through what spokeswoman Dana Perino called a "rough ride."
"We expect our GDP number next week not to be a good one and the next quarter to be tough as well," Perino said, using the abbreviation for gross domestic product.
The Commerce Department will release its first estimate of third-quarter economic performance Thursday, and Wall Street analysts project that it will show the economy contracted by 0.5 percent, according to Thomson/IFR.
Many economists expect the decline to continue into the current quarter and the first three months of 2009, if not longer. The classic definition of a recession is at least two consecutive quarters of negative growth.
The former chairman of the Federal Reserve, Alan Greenspan, testifying before a House committee, said he could not see "how we can avoid a significant rise in layoffs and unemployment."
Zach Pandl, an economist at Barclays Capital, estimates that unemployment will rise to between 7 percent and 8 percent by early next year. Other economists have estimated that it could rise to 8.5 percent.
Currently, the unemployment rate is 6.1 percent. Unemployment peaked at 6.3 percent in 2003 after the brief recession of 2001. It peaked at 7.8 percent in the 1991-92 recession, and above 10 percent in 1982.
In North Carolina, the jobless rate was 7 percent in September, up from 6.9 percent in August and 4.7 percent in September 2007, according to the N.C. Employment Security Commission.
Local statistics should be released today.
The effect of the job losses is rippling through the economy. As jobs disappear, foreclosures rise when out-of-work homeowners can no longer make mortgage payments.
Companies that announced reductions this week include: Yahoo Inc., which is cutting 10 percent of its employees, or 1,500 people; drug-maker Merck & Co., which is eliminating 7,200 positions; and National City Corp., a financial-services company that will eliminate 4,000 jobs.
Yesterday, Chrysler said it would cut 1,825 jobs, and Xerox Corp. said it plans to eliminate 3,000 positions, or 5 percent of its work force.
Chrysler said that the jobs will be eliminated at the end of the year when, ahead of schedule, it closes a plant in Newark, Del., that builds sport utility vehicles, and it eliminates a shift at a Jeep plant in Toledo, Ohio.
Chrysler's job cuts amount to about 6 percent of its U.S. hourly work force. They include the indefinite layoff of about 825 workers at the Toledo North Assembly Plant, where the Jeep Liberty and Dodge Nitro are made.
The Newark assembly plant, where 1,000 people make Dodge Durango and Chrysler Aspen SUVs, was originally expected to shut down at the end of 2009.
More job cuts are likely if the U.S. auto-sales volume continues to decline into 2009, said Laurie Harbour-Felax, the president of the Harbour-Felax Group, an auto-industry consulting company in Detroit. "If volume continues to fall ... then they're going to be left with a whole bunch more people," she said.
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