The New York Times
By JENNIFER GONNERMAN
ON June 25,
2010, Frederick Deare punched out for the last time from his job driving a
forklift at the Old London factory in the Bronx. That summer, everyone at the
plant was being laid off: the oven operators, the assembly-line packers, the
forklift drivers, the sanitation workers. Total jobs lost: 228. Old London, the
snack manufacturer that invented the Cheez Doodle, was moving its operations to
North Carolina. At 53, Mr. Deare, known as Freddy or Teddy Bear to his
co-workers, would have to find a new job.
There was a time, not all that long ago, when the sound of factory whistles
could be heard throughout the five boroughs. In the Bronx, there were
Farberware, the pot manufacturer, which employed 700 people before shutting down
its plant in 1996; Everlast, the boxing glove maker, which closed its operation
in 2003; and Stella D’oro, the cookie-and-breadstick bakery that moved to Ohio
in 2009. A. L. Bazzini Company, the peanut factory that supplies snacks to
Yankee Stadium, will soon be leaving the city, too.
A century ago, about 40 percent of New York City workers held manufacturing
jobs, according to “Working-Class New York,” by Joshua B. Freeman. As Labor Day
rolls around again, that portion has shrunk to less than 4 percent, according to
the federal Bureau of Labor Statistics. And when Mr. Deare received his pink
slip, he joined a growing army of the unemployed in a borough that has been hit
hard by the nation’s financial turmoil. The Bronx has an unemployment rate of 12
percent, the highest in the state. For African-American men like Mr. Deare, the
city’s unemployment rate is even more disturbing: nearly 20 percent.
If getting a job is hard enough for a white-collar worker armed with a college
degree, then the challenge was even steeper for Mr. Deare, who has only a
G.E.D., lost 15 years to drug addiction and did a brief stint in prison. He had
reinvented himself at Old London, reporting to work day after day for a decade;
by the end, he was earning $16.61 an hour with health insurance. How does
someone with his background find a job in the new economy? Mr. Deare was about
to find out.
In those first weeks after he was laid off, Mr. Deare found that he liked
staying home — hanging out with his fiancée, Annette Amaro; eating her cooking;
zoning out in front of the television. With low rent and his three children all
grown, Mr. Deare was in better financial shape than many of his former
co-workers. And it helped that he had received a severance check of nearly
As the end of summer neared, he threw himself into job-hunting. He put in
applications everywhere he could think of, including Target and FedEx. He
contacted his former union to see if it could help. He asked everyone he knew
with a job to look out for him. The effort turned out to be an exercise in
rejection. Nobody offered to hire him; they didn’t even bother calling back.
To keep up his spirits, he called each morning into a 6 o’clock prayer line run
by his daughter, a minister in Massachusetts. Callers shared their worries, then
prayed together; some mornings, Mr. Deare revealed his job woes.
“The hardest part for him is not working, not being in the game,” Ms. Amaro
said. “He’s not a sit-around kind of guy.”
That fall, her mother came through with the best lead: somebody had told her
there might be an opening at one of the meat markets at Hunts Point in the
Bronx. Unsure which market needed help, Mr. Deare visited five or six. Most
wouldn’t even let him fill out an application — “Sorry, we’re not hiring” — but
he managed to leave his résumé at one place. When he returned the following
week, he talked his way into a job.
He started in October, working the midnight-to-8 a.m. shift. The job required
spending all night in frigid temperatures, moving in and out of freezers and
refrigerators, lifting 70-pound boxes. “I’m 53 years old, and this is some
strenuous work,” he said. “Everybody else is 23.”
When he got home in the morning, he would slide into a warm bath. The position
paid $15 an hour, but if he could hold on to it for a few months, he would move
up to $18 an hour, with benefits and a spot in the union.
Reese Grosett and Iraida Rivera had been two of Mr. Deare’s closest friends at
Old London. As of November, neither had a job, and one morning the two met up at
a McDonald’s near the Bronx Zoo. Ms. Rivera confessed that while she had enjoyed
her first five days out of work, Day 6 was different.
“I woke up in the morning, and when I looked at what time it was and I had
nothing to do, I literally cried,” she recalled. “I said, ‘What am I going to do
Of all the people Mr. Grosett and Ms. Rivera knew from Old London, Mr. Deare was
one of the very few who had found work. He had become a source of hope to
everyone else, his good fortune reminding them that even in these bleak times,
it was still possible to find a decent job. But now, a month after he started
work at Hunts Point, Mr. Deare’s fortunes had changed.
“Did he tell you?” Mr. Grosett asked, between sips of orange juice. “They laid
Mr. Deare had recounted to friends what the boss told him: “Business is very
slow right now. If it picks up, I have your number.” This conversation took
place at 5 a.m., and the boss asked if Mr. Deare could stay and finish his
shift. He was tempted to storm off, but considering the state of the economy, it
seemed a bad idea to anger any potential employer, even one who had just let him
go. So he completed the shift.
In many ways, this second layoff stung even more than the first. “I thought I
was on that track again to be a worker, and then — boom! — this happens,” he
said. “It was a low blow.” He was back where he had started: phoning friends for
job leads, filling out applications, waiting for calls. But by now his severance
was gone. He would have to survive on his unemployment benefits: $353 a week.
Some nights, he couldn’t sleep. Other times, he woke at 4 a.m., reached for his
cellphone and played video games for an hour or two, until he grew so tired that
the phone fell from his hand and he was dozing once again. It was hard to say
exactly what caused the insomnia — anxiety about unpaid bills, fear of never
finding another job, an internal time clock accustomed to working the night
shift — but it was a problem he shared with many of his former co-workers.
Once, he woke at 3 a.m. and groped in the dark for his phone. “Should be
sleeping,” he wrote on his Facebook page. “I guess there’s a lot on the mind.”
Dhyalma Diaz, a friend from Old London, responded, “Don’t worry teddy we all
have a lot in our minds.”
That winter, Mr. Deare jumped on every lead that came his way. A friend told him
about a laundry company looking for a truck driver. The job paid $10 an hour
with no benefits, but Mr. Deare reasoned that he was in no position to be picky.
So he pulled on his parka, headed over to the employment agency and spent an
hour in the waiting room, only to learn that the company wanted someone with
experience driving a truck, not a forklift.
Mr. Deare tried for months to get hired at a school for troubled children where
his cousin works, in Westchester County. Finally, he managed to land an
interview for a teacher’s aide position. It sounded as if the job was his, as
long as he didn’t fail a drug test. He urinated into a cup, passed the test,
then waited for the call. One week went by. Then two weeks. Then three weeks. He
left messages, but nobody phoned back.
He was not one to complain, but the strain of not having a job was starting to
show. His moods swung from frustration to depression to rage. To lift his
spirits, his fiancée would tell him: “You know the kind of worker you are — and
you know you’re out there putting in the applications; you’re doing the
footwork. It’s not you. This is what the country is going through.” She made
this point often, but it was hard not to take each rejection personally.
As week after week went by with no good news, his efforts became more
scattershot. In March, he applied for a job at a shoe store. He also filled out
forms for positions in health care and child care. At this point, he figured, he
would take just about anything. It was the attitude of a desperate man: there
was a certain logic to it, but, of course, finding a job in a field where you
have no experience or personal contacts can be next to impossible.
Mr. Deare had kept in touch with about 25 co-workers from Old London, and by
spring none had found new jobs. Still, he was determined to beat the odds.
“Somebody is hiring somewhere, and I’m going to find that person,” he told
He had stayed in touch with his former union, Local 1102 of the Retail,
Wholesale and Department Store Union. During one conversation with a contact
there in late March, he heard about a job opening: forklift driver at a coffee
warehouse in Yonkers.
He got an interview, and the supervisor he met with sounded optimistic about his
chances of being hired. But there was no formal offer. Day after day went by.
For three weeks the wait stretched on. This time, however, he got the job. And
it was a union job, with benefits. He started on April 11 — 290 days after Old
London laid him off.
“You’re speaking to a happy man,” he said after his first day. “I am in my
glory. I mean, today was wonderful.”
There was only one downside: The work paid $10 an hour, 40 percent less than he
had made at Old London. After taxes, his paycheck was even less than the
unemployment benefits he had been collecting. But he tried not to dwell on this.
“I don’t let it bother me that I’m getting less, because of the simple fact I
have something, and a lot of people have nothing,” he said. “You have to crawl
before you can walk.” Four and a half months later, he is still on the job.
Since June 1, when federal unemployment benefits began to expire, an
estimated 325,000 jobless workers have been cut off. That number will swell to
1.25 million by the end of the month unless Congress extends the benefits. The
Senate, so far, has failed to act.
Some senators, including Democrats, have balked at an unrelated provision that
would begin to close a tax loophole enjoyed by some of the richest Americans.
You heard right. Desperately needed unemployment benefits have been held hostage
to a tax break for the rich, and the Senate’s Democratic leadership has had to
delay and finagle to get its own caucus in line.
State-provided unemployment benefits generally last for 26 weeks, and the
federal government picks up the tab after that, provided Congress approves the
extensions. There is no disagreement over the need: 46 percent of the nation’s
15 million jobless workers have been unemployed for more than six months — a
higher level than at any time since the government began keeping track in 1948.
There is not even any genuine debate about how to pay for extended benefits. An
extension through November would cost about $40 billion. But unemployment
benefits are correctly considered emergency spending — they are a vital safety
net, and the money is crucial to supporting consumer demand in a weak economy —
and exempt from pay-as-you-go budget rules.
Nonemergency provisions in the bill do need to be paid for, including renewal of
several generally useful business tax breaks, like the research-and-development
tax credit, totaling $32 billion over 10 years. To help cover those costs,
Democratic lawmakers in the House and Senate started out with the sound idea to
close an egregious tax loophole that allows wealthy fund managers at private
equity firms and other investment partnerships to pay a top tax rate of just 15
percent on much of their earnings — versus a top rate of 35 percent for all
other higher-income Americans.
Closing the loophole would raise an estimated $25 billion over 10 years. Many
private equity mavens, venture capitalists and other partnerships have lobbied
to keep as much of the loophole as they can. Most Republicans and some
Democratic senators — including John Kerry of Massachusetts, Mark Warner of
Virginia and Maria Cantwell of Washington — are doing their bidding.
In its version of the bill, the House closed part of the loophole: fund managers
would retain the special low rate on 25 percent of their privileged earnings.
The loophole measure was watered down even more in the Senate. And investment
partnerships are still lobbying.
Senators aren’t likely to vote on the bill until the end of this week. Then it
would need to be reconciled with the House-passed version. In the meantime,
hundreds of thousands more jobless Americans will lose benefits.
The Senate bill is also urgently needed because it includes a provision to
provide $24 billion in emergency fiscal aid to states, which is vital to
preventing further mass layoffs and damaging budget cuts on the state and local
The right thing to do is obvious. The House and Senate should immediately extend
unemployment benefits and aid to states and close the fund-managers’ tax
loophole — completely.
That so many senators have balked is a bad sign for the economy and for the most
vulnerable Americans. The fact that lawmakers are not willing to ask the
nation’s wealthiest to pay their fair share of taxes also makes a mockery of all
their talk about deficit reduction.
December 6, 2008
The New York Times
By LOUIS UCHITELLE, EDMUND L. ANDREWS
and STEPHEN LABATON
This article was reported by Louis Uchitelle,
Edmund L. Andrews and Stephen
and written by Mr. Uchitelle.
The government’s report of a giant job loss in November, the biggest monthly
decline in a generation, puts more pressure on Congress and the administration
to move quickly on a stimulus package, mortgage relief and perhaps financial aid
for Detroit’s big automakers.
The nation’s employers cut 533,000 jobs in November, the Bureau of Labor
Statistics reported Friday.
Not since December 1974, toward the end of a severe recession, have so many jobs
disappeared in a single month — and the current recession, far from ending,
appears to be just gathering steam.
“We are caught in a downward spiral in which employment, incomes and spending
are collapsing together,” said Nigel Gault, chief domestic economist for IHS
Global Insight. “With private spending frozen, we have no choice but to rely on
a stimulus package to revive the economy.”
The unemployment rate rose to 6.7 percent, up just two-tenths of a percentage
point from October, but up six-tenths over the last three months. More than
420,000 men and women who had been working or seeking work in October left the
labor force in November.
More significantly, the unemployment rate does not include those too discouraged
to look for work any longer or those working fewer hours than they would like.
Add those people to the roster of the unemployed, and the rate hit a record 12.5
percent in November, up 1.5 percentage points since September.
Noting that 1.9 million jobs have been lost since the start of the recession a
year ago — two-thirds of them since September — President-elect Barack Obama
invoked public spending as the best way to get a dead-in-the-water economy
moving again. “This painful crisis,” he said in a statement, is an opportunity
“to improve the lives of ordinary people by rebuilding roads and modernizing
schools for our children,” and by investing in clean energy projects.
A goal of all this spending is to generate 2.5 million jobs over the next two
years, he said, repeating an earlier pledge. Given the accelerating job losses,
hitting that target would barely recover the jobs that have disappeared over the
As part of Friday’s announcement, the government revised higher its estimates of
jobs lost in September and October. Instead of 524,000 jobs disappearing in
those months, 723,000 were lost, or a total of 1.2 million jobs in just three
months. In all, jobs have been lost in each of the last 11 months.
“Obama is being deliberately unclear about those 2.5 million jobs,” said Robert
Pollin, a University of Massachusetts economist. “He is not going to add 2.5
million on top of recovering the 1.9 million that have been lost so far this
Despite the deterioration of the labor market, Democrats in Congress and a
lame-duck president remain in a standoff over rescue measures.
At its core, the stalemate between the Republicans and the Democrats springs
from fundamentally different views about the nature of the crisis and the role
of government in resolving it. The White House contends that it has rightly
focused on the credit and housing markets, while the Democrats see economic
problems that can be resolved only through broader intervention.
New efforts to adopt a broad economic package are likely to wait until the new
president takes office and Democrats have bigger majorities in Congress. That
delay poses the possibility of a deeper recession, according to some experts.
President Bush, appearing in front of cameras on Friday morning at the White
House, said he was “concerned about our workers who have lost jobs.” But he
offered no hint of softening his opposition to either a stimulus package or a
bailout of the automobile industry, saying that the measures already put in
place by the Treasury Department and the Federal Reserve to ease credit problems
would take time to work.
Shortly after his appearance, a White House spokesman, Scott Stanzel, dashed any
expectation of a change in policy when he said that officials expected a
stimulus package would “happen in the next administration.”
Support is building for a significant stimulus package as the economy slips into
a deep recession. Most forecasters expect the gross domestic product to contract
in the current fourth quarter at an annual rate of 4 or 5 percent, and continue
to contract through most of next year, shrinking by 2 percent for all of 2009 —
a contraction that has occurred only once since World War II: in 1982, a year of
“If there was any doubt that a very large fiscal stimulus is required, then the
numbers we have been getting recently should dispel that doubt,” said Jan
Hatzius, chief domestic economist for Goldman Sachs. To offset the private
sector retrenchment, he added, “we will need a stimulus package of $600 billion
at an annual rate, or $1.2 trillion over two years.”
Economists and policy makers increasingly share his estimate of what it will
take to revive America’s $14 trillion economy, with Democratic leaders talking
recently about a stimulus package of $400 billion or more.
Though any broad economic package seems to be delayed, Democrats still had faint
hopes of approving next week a rescue package for the car companies. Their goal
would be to prevent far more rapid deterioration in the job market.
The latest job numbers were stark evidence of a breakdown in consumer spending
and business investment since mid-September, when the Treasury Department and
the Federal Reserve decided to let Lehman Brothers fail, delivering a shock to
the financial sector. Almost simultaneously, stock prices began a free fall,
undermining the wealth and the retirement accounts of millions of Americans.
“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.
Job loss has played a big role in this erosion, he acknowledged. But so have
fewer hours of work, smaller bonuses, less overtime, falling home prices,
falling stock prices and a drumbeat of job cut announcements — the most recent,
this week, from big names like AT&T, Viacom, CVS, DuPont and the Avis Budget
The Dow Jones industrial average, down more than 20 percent since mid-September,
fell Friday morning in response to the November jobs report, but recovered later
and gained 259.18 points, or 3 percent, by the end of trading, to close at
With home prices still in decline, one in 10 mortgage holders was either
delinquent on loans in September or in foreclosure, the Mortgage Bankers
Association reported Friday. That was up from 9.2 percent in June and the
highest percentage since the association began to collect this data 30 years
The mortgage crisis makes lenders ever more reluctant to lend for the purchase
of homes, autos and other big consumer items. In more normal times, lenders
bundle these loans into securities and sell them. The buyers of these securities
have disappeared in the current credit crisis, however, and the Federal Reserve
is considering ways for lenders to borrow from the Fed, using the securities as
Jobs disappeared last month from every sector of the economy except health care
and state government, which mainly added educators. The biggest losses were in
manufacturing, construction, retailing — despite the first month of Christmas
shopping — financial services, hotel and restaurant work and temporary workers.
Over the course of the recession, 604,000 jobs — nearly one-third of the total —
have been eliminated in manufacturing, and the Big Three automakers promise more
layoffs to qualify for a federal bailout.
“Business shut down in November,” said Mark Zandi, chief economist at Moody’s
Economy.com. “Businesses are in survival mode and are slashing jobs and
investment to conserve cash. Unless credit starts flowing soon, big job losses
will continue well into next year.”
The administration says its recent actions are beginning to make credit flow
more easily. “We are pulling some very significant levers on the economy right
now, through what we’re doing with Treasury and what we’re doing with the Fed,”
said Tony Fratto, a White House spokesman.
November 8, 2008
The new York Times
By PETER S. GOODMAN and MICHAEL M. GRYNBAUM
Squeezed by tight credit and plunging spending power, the
American economy is losing jobs at the fastest pace since 2001, and the losses
could accelerate to levels not seen since the deep recession of the early 1980s.
Employers shed 240,000 more jobs in October, the government reported Friday
morning, the 10th consecutive monthly decline and a clear signal that the
economic slowdown is troubling households and businesses.
Since August, the economy has lost 651,000 jobs — more than three times as many
as were lost from May to July. So far, 1.2 million jobs have been lost this
“Clearly, these are very bad numbers,” said Nigel Gault, chief domestic
economist at IHS Global Insight. “Businesses had been paring back for most of
the year, but I suspect that it had been more caution on hiring rather than
firing,” Mr. Gault said. “In September, they decided, ‘O.K., look, this isn’t
just a mini-recession, this is a full-blown recession. We better take some
action.’ And they did.”
The unemployment rate climbed to 6.5 percent, the highest level since 1994 and
up from 6.1 percent the month before.
The Labor Department also steeply revised down its employment numbers for the
third quarter. Employers slashed 284,000 jobs in September, far higher than the
159,000 that was initially reported. In August, 127,000 jobs were lost, compared
with the previous estimate of 73,000.
“The U.S. consumer, which for so many years was the global engine of growth, is
now the world economy’s Achilles heel,” Joshua Shapiro, an economist at MFR, a
research firm, wrote in a note.
The latest signs of distress seemed certain to inject more urgency into the
debate over another round of government stimulus to spur spending, and is more
evidence that President-elect Barack Obama will inherit a deeply troubled
Mr. Obama has in recent months called for another package of so-called stimulus
spending initiatives. Democratic leaders in the House suggested this week that
they might seek swift passage of $60 billion worth of measures that would extend
unemployment benefits and food stamps, while aiding states whose tax revenues
have plummeted. They would then pursue a broader package that could reach $200
billion in spending once Mr. Obama takes office.
The Bush administration has criticized Democratic proposals for immediate aid,
raising the specter of a veto.
On Friday, a spokeswoman for President Bush, Dana Perino, called the employment
numbers “a stark reminder of how critical it is we keep focused on utilizing”
the programs that Washington has put in place, including a $700 billion bailout
of the financial system.
“We know what the main problems are — tight credit and housing markets — and we
have the tools to solve them,” Ms. Perino said. “The programs we’re putting in
place will improve the flow of credit to consumers and businesses that will spur
economic growth, job creation and stabilization of our financial markets.”
Above all, the latest monthly snapshot of the job market reinforced how the
economy remains gripped by a potent combination of troubles — plunging housing
prices, tight credit and shrinking paychecks — with all three operating at once
in a downward spiral.
Companies have been hiring tepidly and laying off workers throughout the year as
business has slowed, while cutting working hours for those on the payroll.
Millions of Americans accustomed to borrowing against homes to finance spending
have lost that artery of cash as home prices have fallen.
Wages have effectively shrunk for most workers, as rising costs for food and
fuel have more than absorbed meager increases in pay. That has further crimped
American proclivities to spend.
In October, weekly wages for rank-and-file workers — those not in supervisory or
managerial positions — grew just 2.9 percent from October 2007, well below the
rate of inflation.
The health care industry and public schools were the only sectors of the economy
that showed more than notional growth last month. Otherwise, the losses were
deep and broad. The troubles in the auto industry led to thousands of layoffs at
car dealerships and factories that produce car parts. Tens of thousands of
workers at manufacturers and construction companies lost their jobs.
Janitors, administrative workers and temporary employees were hit hard, with
57,000 jobs lost in October. Even general merchandise stores, which have seen an
increase in business because of lower prices and more budget-minded consumers,
laid off 18,000 workers last month.
The 284,000 jobs lost in September was the biggest monthly toll since November
2001, in the aftermath of the terrorist attacks in New York and Washington.
All of this has cut into spending power. Consumer spending dropped between July
and September — the first quarterly decline in 17 years — further eroding the
motivation for businesses to hire.
Friday’s report offered signs that the pressures on workers are rapidly
intensifying. Between January and August, the economy lost about 75,000 jobs a
month, according to preliminary numbers from the Bureau of Labor Statistics. The
pace has more than doubled since then.
Many economists now expect the unemployment rate to reach 8 percent by the
middle of next year, a level not seen in 25 years. Most forecasts envision the
economy shrinking well into the next year and perhaps until 2010.
Recent days have offered new indications of trouble. On Thursday, several
retailers announced sharp declines in sales in October, suggesting that consumer
spending would continue to tighten. The annual pace of auto sales fell sharply
in October, down 15 percent compared with September, according to an analysis
from Goldman Sachs.
The widely watched Institute for Supply Management survey fell in October to
depths last seen 26 years ago, reflecting shrinking industrial activity and
suggesting weakening demand for goods as the economy slows.
That weakness has gone global, as many other major economies also are hit by the
slowdown — from Spain and Britain to Japan and Brazil — and as the financial
crisis now restricts economic activity in much of the world.
At the same time, banks continued to tighten their purse strings in October,
according to a survey of senior loan officers conducted by the Federal Reserve.
Economists construed the survey as an indication that even healthy companies and
many households were having difficulty securing capital, further braking the
economy and making prospects more difficult for American workers.
Many economists expect this picture to worsen as the consequences of the global
financial crisis ripple out to businesses and households. Though the $700
billion taxpayer-financed bailout has staved off fears of an imminent collapse
and restored some order to the financial system, it has not persuaded banks to
lend freely. Credit remains tight for businesses and homeowners.
November 6, 2008
Filed at 1:12 p.m. ET
The New York Times
By THE ASSOCIATED PRESS
WASHINGTON (AP) -- The number of out-of-work Americans
continuing to draw unemployment benefits has surged to a 25-year high, while
shoppers turned extra frugal, further proof of the damage from sinking economy,
credit problems and financial stresses.
The Labor Department reported Thursday that the number of people continuing to
draw unemployment benefits jumped by 122,000 to 3.84 million in late October. It
was the highest level since late February 1983, when the country was struggling
to recover from a long and painful recession.
New filings for jobless benefits last week dipped to 481,000, a still-elevated
level that suggests companies are in a cost-cutting mode.
The work force was much smaller in February 1983, when the number of people
continuing to claim benefits was 3.88 million.
At that time, about 87.2 million Americans were in the work force, compared to
almost 134 million today. That's one reason the unemployment rate was 10.4
percent in February 1983, compared to 6.1 percent last month.
Still, the increase in people continuing to draw unemployment benefits is an
indication that laid-off workers are having a harder time finding new jobs.
Democrats in Congress are pushing to include an extension of unemployment
benefits in a new stimulus package, which could be taken up this month. Benefits
typically last 26 weeks.
Congress approved a 13-week extension of benefits in June, and the department
said about 773,000 additional people claimed benefits through that program for
the week ending Oct. 18, the most recent data available. That extension is
scheduled to end next June.
Americans hit by layoffs, shrinking nest eggs and other stresses are pulling
back even more, sending sales at many big retailers down in what may have been
the weakest October in decades. That further darkened the outlook for the
holiday sales season.
Target Corp. and Costco were among the many retailers reporting sales declines
last month. Wal-Mart Stores Inc., the world's largest retailer, however, logged
a sales gain.
On Wall Street, stocks slumped. The Dow Jones industrials were down about 350
points in afternoon trading.
Hoping to prevent a deep recession, the Federal Reserve last week ratcheted down
interest rates last week to 1 percent and left the door open to further
The country's economic state has rapidly deteriorated in just a few months. The
economy contracted at a 0.3 percent pace in the July-September quarter,
signaling the onset of a likely recession. It was the worst showing since the
last recession, in 2001, and reflected a massive pull back by consumers.
With the economy sinking and consumers appetites flagging, employers have been
slashing jobs. They are expected to cut around 200,000 jobs when the government
releases the October employment report on Friday. The unemployment rate -- now
at 6.1 percent -- is expected to climb to 6.3 percent in October.
As American consumers watch jobs disappear and their wealth shrink, they'll
probably retrench even further.
That's why analysts predict the economy is still shrinking in the current
October-December quarter and will continue to contract during the first quarter
of next year. All that more than fulfills a classic definition of a recession:
two straight quarters of contracting economic activity.
Yet another report out Thursday showed the efficiency of U.S. workers slowed
sharply in the summer as overall production, or output, declined, reflecting the
hit to consumers from housing, credit and financial troubles.
Productivity -- the amount an employee produces for every hour on the job --
grew at an annual pace of 1.1 percent in the July-September quarter, down from a
3.6 percent growth rate in the second quarter, the Labor Department reported.
With productivity growth slowing, labor costs picked up. Unit labor costs -- a
measure of how much companies pay workers for every unit of output they
produce-- increased at a 3.6 percent pace in the third quarter, compared with a
0.1 percent rate of decline in the prior period.
The 1.1 percent productivity growth logged in the summer beat economists'
expectations for a 0.8 percent growth rate. The pickup in labor costs-- while
welcome to workers -- was faster than the 2.8 percent pace economists were
Economists often look at labor compensation for clues about inflation. These
days, however, the Federal Reserve and analysts are more concerned about the
economy's feeble state. While the pick up in labor costs might raise some
economists' eyebrows, the Fed is predicting inflation pressures will lessen as
the economy loses traction.
The 1.1 percent productivity gain was the smallest since the final quarter of
last year, while the increase in labor costs was the biggest since that time.
Internet company, eBay, announced Monday that it was laying off 10 percent of
its work force, or about 1,000 permanent employees and several hundred temporary
The announcement was largely unrelated to the potential economic impact of a
slowdown in ecommerce. Rather, it represented an attempt by eBay to improve the
performance of its core marketplace division, which has experienced declining,
single-digit growth in the last few years while the rest of e-commerce grows at
a double-digit clip. The company said it would take a pretax restructuring
charge of $70 million to $80 million, largely in the fourth quarter.
“While never an easy decision to make, these reductions will help improve our
operations and strengthen our ability to continue investing in growth,” John J.
Donahoe, eBay’s chief executive, said in a statement.
The company also announced on Monday that it was acquiring Bill Me Later, an
online payments firm based in Timonium, Md., for $945 million in cash and stock.
eBay will combine the company, which enables payments online for companies like
Wal-Mart Stores and Continental Airlines, with its rapidly growing PayPal
“We are making aggressive moves to strengthen our leadership positions in
e-commerce and payments to competitively position our company for long-term
growth,” Mr. Donahoe said. “Bill Me Later is a perfect complement to our
portfolio, a company that belongs with PayPal. Together, PayPal and Bill Me
Later will make online payments safer, easier and more convenient than ever.”
The company also announced that it was acquiring the popular Danish classified
advertising sites DBA.dk and BilBasen for $390 million. EBay has been building a
portfolio of European classified Web sites and already owns properties like
Kijiji, Gumtree, Marktplaats, LoQuo and mobile.de in Germany. EBay also owns a
minority stake in the American online classifieds leader Craigslist, but its
interest in buying the firm outright lead the companies to sue each other
earlier this year.
EBay’s interest in creating a global network of classified advertising business
is partly designed to create a complementary alternative to its sagging
traditional auctions business. Classified advertising sites are cheaper to
build, have few of the shipping hassles as global e-commerce sites, and do not
have the kind of volatile seller community that have reacted so vociferously to
recent changes in the core eBay marketplace. They also take relatively few
employees to operate.
The company said Monday that it expected to hit the low end of its third
quarterly earnings guidance. Earnings are scheduled to be released Oct. 15.
The New York Times
By PETER S. GOODMAN
American economy lost 159,000 jobs in September, the worst month of retrenchment
in five years, the government reported on Friday, amplifying fears that an
already painful downturn had entered a more severe stage that could persist well
into next year.
Employment has diminished for nine consecutive months, eliminating 760,000 jobs,
according to the Labor Department’s report. And that does not count the
traumatic events of recent weeks, as a string of Wall Street institutions
collapsed, prompting the $700 billion emergency rescue package approved by
Congress on Friday.
“It’s a dismal report, and the worst thing about it is that it does not reflect
the recent seizure that we’ve seen in the credit markets,” said Michael T.
Darda, chief economist at MKM Partners, a research and trading firm in
Greenwich, Conn. “There’s really nothing good about this report at all. We’ve
lost jobs in nearly every area of the economy, and this is going to get worse
before it gets better because the credit markets have deteriorated basically on
a daily basis for the last few weeks.”
Though the bailout may restore order to the financial system and eventually
filter through the economy by making it easier for businesses to secure capital,
few analysts expect it to swiftly reverse the nation’s fortunes. Housing prices
continue to fall, eroding household wealth just as millions suffer the weight of
unmanageable debt. The deteriorating job market has taken paychecks out of the
economy, reinforcing a predilection for thrift that has cut sales from car
showrooms to hair salons.
Banks should see their balance sheets improve as the government relieves them of
disastrous investments, yet they may remain skittish and reluctant to lend.
“At best, the bailout stops a much deeper decline in activity,” Mr. Darda said,
“but it’s not like they’re going to do this and all of the sudden the clouds
part and the skies are clear.”
Only a few weeks ago, many economists still held hopes that the economy might
recover late this year or early next. But with the job market now contracting
faster, and fear dogging the financial system, the broad assumption has taken
hold that 2008 is a lost cause.
Most economists have concluded that the economy will struggle well into next
year. More pessimistic forecasts envision the economy remaining weak through
most or all of next year.
“This is an economy in recession, and every dimension of the report confirms
that,” said Ethan S. Harris, an economist at Barclays Capital. “This has been
preceded by a slow-motion recession. Now we’re going into the full-speed
recession that will last somewhere between three and five quarters.”
For the first eight months of the year, the economy lost an average of 75,000
jobs each month. September’s report more than doubled the pace.
“A lot of companies came to the realization that there was no momentum in the
economy to pick them up in the second half of 2008,” said Steve Drexel, chief
executive of Corestaff Services, a staffing company in Houston. “They had been
hanging on to people and hoping things would improve, but now a lot companies
are just sort of retrenching.”
The unemployment rate remained steady at 6.1 percent in September, but
economists said that reflected how people who had given up looking for work were
not counted. Over the last year, the unemployment rolls have swelled by 2.2
million, to 9.5 million. On Friday, Goldman Sachs forecast that the jobless rate
would reach 8 percent by the end of next year, which would be the highest in 25
In Charlotte, Mich., Sean Schwartz, 26, has been out of a job for nearly two
months since his last stint as a construction worker. His $750-a-week paycheck
has been replaced by a $620.10 unemployment check every other week.
Mr. Schwartz and his wife — who works at Wal-Mart — have a 2-year-old daughter
and are expecting a baby in December. His job search has turned up little beyond
fast-food jobs at a fraction of his previous earnings. Mr. Schwartz is becoming
“We’re not getting the bills paid,” he said, estimating that his family is
behind $5,000 on medical bills for his daughter and his wife’s prenatal care.
“It’s rough. There’s nothing really out there.”
As the impact of Wall Street’s distress ripples out, economists expect
opportunities to grow leaner still. On Friday morning, banks needing to borrow
from other banks were paying nearly 4 percent more in interest than the Treasury
offers on savings bonds — a spread reflecting a general unwillingness to part
with cash. That spread was wider than after the 1987 stock market crash.
“It sets us up for some really grim news in the immediate future,” said Robert
Barbera, chief economist at the research and trading firm ITG. “Credit was
already hard to get in early September. But it’s really impossible to get now.”
The report amounted to a catalog of woes afflicting Americans who depend on
Manufacturing lost 51,000 jobs in September, bringing the decline so far this
year to 442,000. Retailers lost 35,000 jobs, and construction shed 35,000.
Employment in transportation and warehousing slid by 16,000.
Jobs in financial services dropped by 17,000, and have slipped by 172,000 since
employment peaked in that part of the economy in December 2006. Health care
remained a bright spot, adding 17,000 jobs in September. Mining added 8,000
Government payrolls grew by 9,000 jobs — a trend with a limited shelf life as
the economic slowdown shrinks tax revenue.
Doug Fleming has been out of work since last fall, when he lost his job as a
quality inspector for a home builder in Anderson, Ind. Nearly 800 résumés later,
he has received no offers. “Maybe it’s my age,” said Mr. Fleming, 41.
His wife has emphysema but has visited the doctor only once in the last year
because his family lacks health insurance, he said. His daughter, 15, was hoping
to talk her way into her high school’s homecoming football game on Friday
evening, unable to afford a ticket.
Unemployment rose to 11.4 percent among African-Americans in September, and to
19.1 percent among teenagers.
More than 21 percent of those receiving unemployment checks have been without
work for more than six months, up from 17.6 percent a year ago, the report said.
In the suburbs of Richmond, Va., Ginny Hoover, a single mother, has been out of
a job since November, when she lost her clerical position at a pharmaceutical
company. Her $500-a-week take-home pay became a $285-a-week unemployment check.
Barring an extension of those benefits by Congress — something blessed by the
House of Representatives on Friday — Ms. Hoover, 48, received her last check
“I’ve completely exhausted my savings, which was supposed to be a down payment
for a house,” she said.
Initially, Ms. Hoover sought another office position. “Now, I’ll apply for
anything that has a paycheck attached to it,” she said. Her current focus: a job
selling cellphone service at a kiosk at a Costco store for $7 an hour — less
than half of what she earned in her last position. “It won’t even cover my
rent,” she said.
The number of Americans working part time because their hours were cut or they
could not find a full-time job increased by 337,000 in September, to 6.1 million
— a jump of 1.6 million over the last year, and the highest number since 1993.
Average weekly wages for some 80 percent of the American work force have risen
by a meager 2.8 percent over the last year, with the gains more than reversed by
increases in the prices of food and fuel.
“This economy is just not creating near enough economic activity to generate
wage or income growth,” said Jared Bernstein, senior economist at the
labor-oriented Economic Policy Institute in Washington. “That has serious living