By Mark Huffman
ConsumerAffairs.com
January 9, 2009
More Americans lost their jobs in December, as the U.S. Labor Department reports the nation's unemployment rate jumped to 7.2 percent, a 16-year high.
The economy shed 524,000 jobs during the month, slightly fewer than analysts predicted. Still, the report put an exclamation point on an ugly year. U.S. employers eliminated 2.6 million jobs in 2008, the most in a single year since 1945, when the government demobilized following World War II.
"When the going gets tough, the tough cut payrolls and that is exactly what is happening," said Joel Naroff, chief economist for Naroff Economic Advisors, in Holland, Pa.
Naroff says the huge job losses in December, and the rapid rise in unemployment in the fourth quarter, suggests companies are not waiting to see what happens in the economy, but are reacting immediately to cut their overhead so they can ride out the economic storm.
While health care and education managed to add a few jobs in December, the rest of the economy seemed to go into hibernation. Manufacturing and construction all but shut down during the month.
Naroff says the December employment report was as bad as predicted, and maybe even worse.
"The October and November job losses were revised upward by over 150,000 and when you lose almost 2 million jobs in just four months, it says conditions are grim," he said. "The jump in the unemployment rate will be the lead story on the news and that can only lead to further declines in consumer confidence."
But there may be a silver lining to all of this. While it is true that firms reacted immediately to the economic meltdown, it might mean the recovery time will be shortened. Naroff says he believes the adjustment time frame has, in fact, been shortened dramatically as firms know in real time about the state of the economy and their production and inventory situation.
"They aren't waiting and wondering but are acting," Naroff said. "This is causing job layoffs to skyrocket and that is likely to remain the case for a few more months. But the flip side of that is the possibility that the payroll cuts will slow rapidly sooner than many expect."
