The unemployment rate in the US probably jumped last month to the highest level in 16 years as slumping sales forced employers to slash staff, economists project reports this week will show.
Unemployment climbed to 7.5 percent and payrolls fell by 530,000, the 13th consecutive decrease, the median estimate in a Bloomberg News survey showed ahead of US Labor Department figures to be released on Friday. Other reports could show manufacturing, services and housing shrank further, signaling more firings ahead.
Plunging demand and frozen credit are causing companies from Caterpillar Inc to General Motors Corp to pare jobs and output to prevent unsold goods from piling up. Concern that the recession will deepen after the economy contracted at the fastest pace in 26 years last quarter was prompting US President Barack Obama to push for quick passage of his stimulus plan.
“The labor market will look terrible for a while,” said Sung Won-sohn, a professor of economics and finance at California State University Channel Islands, in Camarillo, California. “If the downward momentum is not arrested, the consequences could be disastrous. Policy makers need to act quickly.”
The jobless rate in December reached 7.2 percent. Employers cut 524,000 workers from payrolls that month, bringing total job losses last year to 2.6 million, the most since 1945.
This week’s report may also show manufacturers cut 143,000 jobs following a reduction of 149,000 in December that was the biggest since 2001, the Bloomberg survey showed.
The Institute for Supply Management’s factory index, due tomorrow, fell to 32.5 last month, the lowest level since 1980, from a reading of 32.9 the prior month, the survey median showed. A reading of 50 is the dividing line between growth and contraction.
The Tempe, Arizona-based group’s gauge for service industries, which make up about 90 percent of the economy, probably fell to 39 from 40.1.
That report is due on Wednesday.
Caterpillar, the world’s largest maker of bulldozers and excavators, said on Friday it would dismiss 2,110 factory workers, adding to the 20,000 job losses it announced last Monday.
“Depending on business conditions, more layoffs and separations may be required as the year unfolds,” the Peoria, Illinois-based company said in a statement.
Businesses were also slashing spending on new equipment. Factory orders fell 3 percent in December, the fifth consecutive decline, economists forecast ahead of a Commerce Department report on Thursday.
Automakers including GM, Chrysler LLC, Ford Motor Co and Toyota Motor Corp are scaling back North American output. GM, which already closed most of its 22 plants in North America last month, said it would eliminate shifts in the second quarter at plants in Ohio and Michigan and cut about 2,000 jobs.
The economy contracted at a 3.8 percent annual rate last quarter as consumer spending continued to slide.
The slump caused unsold goods to pile up, indicating more cutbacks are in the offing.