Recession-Battered Employers Eliminate Near 600,000 Jobs in January

A deepening global downturn has left more Americans unemployed than in nearly three decades, as businesses continue to cut back aggressively in order to survive tough times.

The Labor Department reported Friday that 598,000 private sector jobs were lost in January, pushing the American unemployment rate to a higher than expected 7.6%, up from 7.2% in December.

Economists had forecast that 540,000 jobs would be eliminated, pushing the unemployment rate to 7.5%.

December job losses were revised to 577,000, from 524,000. Since Dec. 2007, 3.6 million jobs have been lost. About half of these job losses occurred in the final three months of 2008. More than 11.6 million Americans are now unemployed, after jobs were eliminated across nearly all major industrial sectors.

The speed and scale of the January layoffs were staggering. In the past week alone, Macy's laid off 7,000. Eastman Kodak announced 4,500 job cuts. Starbucks shuttered 900 stores worldwide, letting go 6,700 workers in the process. Tech also felt the pinch. Microsoft and Intel dismissed 5,000 staff apiece. Sprint Nextel axed 8,000. Heavy industry hemorrhaged jobs, indicating the severity of the slowdown worldwide. Caterpillar cut 22,110 jobs; Alcoa laid off 13,500; and Boeing fired 10,000. Merrill Lynch and Citigroup began job cuts that will eventually add up to the tens of thousands. (See the Forbes Layoff Tracker.)

"Businesses are rushing to cut as rapidly as possible and the more they cut now, the less we will see being cut three or four months down the road. They are shortening the adjustment period," said Joel Naroff, an economist at Naroff Advisers. "Get it out of the way and let's move on."

But it is not just big firms that are sharply cutting back. On Wednesday, payroll manager Automatic Data Processing reported that 522,000 private sector jobs were lost in January, and more than half of the layoffs were at medium-sized firms that employ fewer than 500 workers. (See "ADP Says Half Million Jan. Jobs Frozen Out.")

Widespread job losses and a massive pullback in spending caused the U.S. gross domestic product to fall at the fastest clip in more than twenty years during the final quarter of 2008, as businesses and consumers react to the spasms of a deepening credit crisis and the housing quagmire that sparked it.

The Obama administration has reacted aggressively to surging unemployment and a seized-up economy with a nearly $900 billion economic stimulus package that now awaits Senate approval. The problem is that the money will not really have an impact on the job situation until summer, according to Naroff. "Businesses won't run out and invest [just] because they have a little bit of cash, and households are going to save. Households and businesses start spending when the economy gets jump-started," he remarked.

The other big problem is that the rescue bill itself has caught a lot of heat for building so-called bridges to nowhere and other projects billed as "shovel-ready" that may not foster real economic growth. "A lot of people are cynical about how effective it's going to be, and that's damaging. The hope had been that there would be some confidence bounce as a result, but I'm not [expecting] that's going to happen," said Naroff. "I don't write off the bill at once. I have some hope for it, but people have to believe. I think we'll get something from the stimulus package, but it's going to take awhile."

The already grim government data do not include the growing group of Americans who have given up on finding a job or who cannot land a full-time position and so settle for something part time instead. The number of workers considered underemployed in the United States "has been shooting through the roof," according to Michael Feroli, an economist at JP Morgan Chase. "Underutilization in the labor force is worse than it seems, and it seems pretty bad."

Among the unemployed, the number who ended up with temporary jobs increased to 7.0 million in January. This measure has grown by 3.2 million during the past year.

This story comes courtesy of Forbes.com.