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With the economy deteriorating rapidly, the nation’s employers shed 533,000 jobs in November, the 11th consecutive monthly decline, the government reported Friday morning, and the unemployment rate rose to 6.7 percent.
The decline, the largest since December 1974, was fresh evidence that the economic contraction accelerated in November, promising to make the current recession, already 12 months old, the longest since the Great Depression. The previous record was 16 months, in the severe recessions of the mid-1970s and early 1980s.
“We have recorded the largest decline in consumer confidence in our history,” said Richard T. Curtin, director of the Reuters/University of Michigan Survey of Consumers, which started its polling in the 1950s. “It is being driven down by a host of factors: falling home and stock prices, fewer work hours, smaller bonuses, less overtime and disappearing jobs.”
The employment report increased the likelihood that Congress, with the support of President-elect Barack Obama, will enact a stimulus package by late January that could exceed $500 billion over two years. More than half that money would probably be channeled into public infrastructure spending. Many economists consider such investments an effective way to counteract, through federally financed employment, the layoffs and hiring freezes spreading through the private sector.
“Basically $100 billion of public investment in such things as roads, bridges and levees would generate two million jobs,” Robert N. Pollin, an economist at the University of Massachusetts, said. “That would offset the two million jobs that we are now on track to lose by early next year.”
CHICAGO (Reuters) – President-elect Barack Obama announced his top budget officials on Tuesday and promised significant spending cuts to partially offset a costly stimulus package that aims to revive the U.S. economy.
As the top two officials at the Office of Management and Budget, Peter Orszag and Rob Nabors will closely examine federal spending to cut out wasteful programs, Obama said.
“If we are going to make the investments we need, we also have to be willing to shed the spending that we don’t need,” Obama said at his second press conference in as many days.
One obvious example: Crop subsidies to farmers who make more than $2.5 million per year, Obama said.
Though he does not take office until January 20, Obama’s team of economic advisers are already working out the details of a two-year package to save or create 2.5 million jobs that could cost several hundred million dollars.
Obama himself meanwhile has dropped his former low-profile approach and spoken directly to the American people with two news conferences this week. A third Obama press appearance is scheduled for 10:45 a.m. EST Wednesday.
Bush administration officials continue to extend massive life support efforts to the ailing U.S. financial system.
The Federal Reserve on Tuesday announced a $600 billion program to buy mortgage-related debt and securities, and a $200 billion program to increase the availability of consumer debt, such as credit cards and auto loans.
Treasury Secretary Henry Paulson urged patience and said any effort will take time to work.
Orszag now heads the Congressional Budget Office and Nabors currently serves as staff director of the House Appropriations Committee. Both previously held White House positions under President Bill Clinton.
Their announcement follows on Monday’s unveiling of New York Federal Reserve Bank President Timothy Geithner as Obama’s Treasury secretary and Lawrence Summers, a former Treasury secretary under Clinton, as director of his National Economic Council.
Obama’s aides are in contact with Bush administration officials, who said they would work closely with Geithner and other incoming officials on any new rescue plans.
The scope of the economic crisis has widened since Obama’s November 4 victory over Republican John McCain, with auto companies warning that they are short on cash, unemployment numbers rising and the government bailing out yet another gigantic financial institution, Citigroup Inc.
New figures released on Tuesday showed that the U.S. economy shrank more severely during the third quarter than previously estimated as consumers cut spending at the steepest rate in 28 years. Corporate profits and business investment fell as well.
Obama has kept a low profile until this week’s news conferences, which are intended to show the priority he places on addressing the worst economic crisis since the Great Depression.
He said on Monday he has not yet decided whether to roll back President George W. Bush’s 2001 tax cuts for the wealthy, which would provide the government with much-needed revenue, or simply allow them to expire at the end of 2010 as scheduled, a move that would avoid what would likely be a bruising fight in Congress.
Nov. 20 (Bloomberg) — I sat in the window of a cafe this month in Annapolis, Maryland, a sailing town near Washington, counting parked cars. “Honda, Honda, Nissan, Toyota, Honda, Lexus (made by Toyota), Mazda, and a battered 1970s Cadillac.”
No wonder the U.S. carmakers are in meltdown and begging to be plugged in to the Treasury’s life-support machines.
Don’t be misled, though — the something that is rotten in the auto industry has nothing to do with the credit crunch, and everything to do with years of mismanagement, shoddy products and bad choices.
Consider the credit-rating histories of General Motors Corp. and Ford Motor Co. For both companies, the rot started all the way back in August 2001, when Standard & Poor’s put the A grades they had enjoyed for a decade on review for downgrade. In October of that year, they each suffered a two-level cut to BBB+ that left them just three moves away from junk status.
So seven years ago, the car companies were already on the slide, after years of their Japanese rivals stealing market share with improved production methods and better reliability. That was well before the words “credit crunch” had become as ubiquitous as “would you like large fries with that?” or “the new Bond film isn’t as good as the previous one.”
Pirates of Detroit
In other words, give us what we want or suffer the consequences. That sure sounds like blackmail to my ears, except even Somali oil-tanker pirates have so far stopped short of trying to pilfer $25 billion from their victims.
So, what to do? Nobody, least of all President-elect Barack Obama, wants to see the 250,000 people who work directly for the big three U.S. automakers tossed on the scrapheap, or the other 4 million workers whose job security is at risk somewhere along the supply chain from the drawing boards of Detroit to the car showrooms of America.
There seems to be a groundswell of support building for the concept of retraining and retooling auto workers away from churning out four-wheeled gas guzzlers to put them instead at the vanguard of the fight against climate change.
“Wouldn’t the benefits be greater if the U.S. government spent $25 billion to $75 billion — the current dollars proposed to bail out the auto industry — to train engineers, support infrastructure and work in the much-neglected alternative energy space?” wrote Tom Sowanick, who helps manage $20 billion as chief investment officer of Clearbrook Financial LLC in Princeton, New Jersey.
I Spy iCar
New York Times columnist Thomas Friedman suggested earlier this month that Apple Inc. CEO Steve Jobs should be persuaded to sign up for “national service” and run a car company for a year, long enough to invent the iCar.
I think Friedman is on to something. Sure, the iCar would be available in any color as long as it’s white (with a black model to be introduced as soon as all the early adopters have a pearlescent model in the driveway), and the windshield would be scratched to opacity within weeks. It would probably run on fresh air, though, and the packaging would be to die for.
First off, the U.S. government would need to absorb all those legacy pension and health-care costs that the automakers have used as an excuse for years to dodge getting their collective act together. Splitting the welfare issue from the business travails would deliver some much-needed clarity to the true financial position of the carmakers.
Then, turn the entire industry over to people who might make a difference. Give GM to Jobs, let Microsoft Corp. founder Bill Gates run Ford and allow billionaire Warren Buffett to try his hand at Chrysler. In five years, I bet that car counting in Annapolis would deliver a very different result.
(Mark Gilbert is a Bloomberg News columnist. The opinions expressed are his own.)
Confounding the conventional wisdom that he is a lame duck president with no agenda as his days in office dwindle, President George W. Bush is redoubling his efforts to mutilate the country before his term expires, aides confirmed today.
“President Bush has spent the first seven years and ten months of his presidency doing everything in his power to leave the United States in smoldering ruins,” said White House spokesperson Dana Perino. “He certainly is not going to let the final days of his tenure go to waste.”
While Ms. Perino said that President Bush is proud to have led the U.S. into a “pointless and totally avoidable catastrophe in Iraq” and “the most terrifying financial cataclysm since the Great Depression,” he is “in no way prepared to rest on his laurels.”
Mr. Bush is “delighted,” Ms. Perino said, that the stock market has lost one trillion dollars of its value in the last three days, but “that’s just the tip of the iceberg in terms of the damage he hopes to wreak in his remaining time in office.”
Among the targets for destruction that the President is currently eyeing, Ms. Perino indicated that the demise of the Big Three automakers was at the top of his list.
“If the President could preside over the disappearance of the Big Three and the millions of jobs they represent, that would be the ultimate feather in his cap,” she said.
For his part, Mr. Bush took few questions from reporters today, saying that he had to return to the Oval Office to order random airstrikes over Belgium.
Obama’s Day In The Rain
Barack Obama spent part of Tuesday outside in the rain in Chester, PA, while John McCain postponed his outside rally in nearby Quakertown. Dressed in sneakers and jeans, the rain pouring down as he spoke, Obama addressed the 9,000 who turned out. “”Let me just begin by saying that a little bit of rain never hurt anybody.”
Oct. 3 (Bloomberg) — The U.S. lost the most jobs in five years in September and earnings rose less than forecast as the credit crisis deepened the economic slowdown.
Payrolls fell by 159,000, more than anticipated, after a 73,000 decline in August, the Labor Department said today in Washington. The jobless rate, the last one reported before the presidential election, remained at 6.1 percent. Hours worked reached the lowest level since records began in 1964.
The world’s largest economy may be headed for bigger job losses as the worst financial meltdown since the Great Depression causes consumers and companies to retrench. A sinking labor market and rising borrowing costs raise the odds Federal Reserve policy makers will cut interest rates by their Oct. 29 meeting.
“The financial panic is a body blow to business confidence, and companies are now battening down the hatches,” Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania, said before the report. “We’re in store for very sizable job losses across many industries. A rate cut by the Fed could come before the next meeting.”
Revisions added 4,000 to payroll figures previously reported for August and July. The Labor Department said it was “unlikely” that Hurricane Ike, which struck the Gulf Coast last month, “had substantial effects” on payrolls figures.
After today, the total decline in payrolls so far this year has reached 760,000. The economy created 1.1 million jobs in 2007. […]
The jobless rate is up 1.4 percentage points from September 2007. Since World War II, the rate has risen only twice during similar periods before presidential elections. In both cases — when Bill Clinton defeated George H. W. Bush in 1992 and when Ronald Reagan beat Jimmy Carter in 1980 — the incumbent party lost the election.
Americans will go to the polls on Nov. 4 and the October jobs report is due Nov. 7.
“Voters are extremely angry, and they want someone to blame,” said Scott Anderson, senior economist at Wells Fargo & Co. in Minneapolis.
Democratic presidential nominee Barack Obama has opened up a lead over Republican rival John McCain in the aftermath of their first debate and amid growing concerns about the economy, according to a Pew Research Center survey taken Sept. 27 to Sept. 29. A mid-September poll from Washington-based Pew had shown the candidates were in a statistical dead heat.
Earlier in September, a Bloomberg/Los Angeles Times poll showed more respondents said Obama would do a better job handling the financial crisis than McCain, and almost half of the voters believed he had better ideas to strengthen the economy than his rival.