U.S. Payrolls Decline by 533,000, Most Since 1974

By Bob Willis

Dec. 5 (Bloomberg) -- U.S. companies slashed payrolls at the fastest pace in 34 years as the economy headed for its deepest and longest recession since World War II.

Employers cut 533,000 jobs last month, bringing losses so far this year to 1.91 million, the Labor Department said today in Washington. November’s drop exceeded all 73 forecasts in a Bloomberg News survey. The unemployment rate rose to 6.7 percent, the highest level since 1993.

“It’s unbelievable,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts. “We’re well on our way to the worst recession of the postwar period.”

Payrolls are likely to keep sliding into next year as the collapse in credit and slump in spending hurt companies from General Motors Corp. to Citigroup Inc. and AT&T Inc. President- elect Barack Obama, confronting what he called a “crisis of historic proportions,” announced a plan last week to save or create 2.5 million jobs over two years.

Stock futures sank. Contracts on the Standard & Poor’s 500 index lost 2.1 percent to 829.90 at 8:34 a.m. in New York.

Payrolls were forecast to drop by 335,000, according to the median estimate in the Bloomberg survey. The jobless rate was projected to rise to 6.8 percent. Revisions for September and October increased job losses by 199,000. November was the 11th consecutive drop in payrolls.

‘Very Fearful’

“You are seeing the impact of the lack of credit feeding through to a lot of companies, who are very fearful,” said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina, and a former congressional staff economist. “Consumer confidence is going to be bad. Personal income numbers will be awful. It is going to be a difficult winter for a lot of people.”

Factory payrolls fell 85,000 after decreasing 104,000 in October. The return of 27,000 striking machinists at Boeing Co. last month helped limit the drop.

Economists had forecast a decline of 100,000 manufacturing jobs. The decrease included a loss of 13,100 jobs in auto manufacturing and parts industries.

Today’s report also reflected the housing slump and the worst credit crisis in seven decades. Payrolls at builders dropped 82,000 after decreasing 64,000. Financial firms decreased payrolls by 32,000, after a loss of 31,000 jobs the prior month.

More to Come

“We don’t get the job losses stopping until 2010,” Kurt Karl, chief U.S. economist at Swiss Re in New York, said in a Bloomberg Television interview.

Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 370,000 workers after declining 153,000 in the previous month. Professional and business services, a category that includes temporary workers, eliminated 136,000 jobs. Retail payrolls decreased by 91,300 after a decline of 62,200.

Education and health services industries added 52,000 jobs and government payrolls increased by 7,000.

The employment slump was a key factor in determining the start of the recession. The National Bureau of Economic Research, the arbiter of U.S. business cycles, announced this week that a contraction began in December 2007, the month payrolls peaked.

At 12 months, the recession is already the longest since the 16-month slump that ended in November 1982.

Stimulus Package

The employment report, the second issued since Obama was elected president on Nov. 4, is likely to add to pressures on policy makers to craft additional stimulus measures. Obama named a team that includes New York Federal Reserve Bank President Timothy Geithner as Treasury Secretary-designate and former Fed Chairman Paul Volcker as head of a new White House panel aimed at reviving the economy.

“It’s time to not just address the immediate economic threats but to start laying the groundwork for long-term prosperity,” Obama, 47, said Dec. 3 as he announced former energy secretary Bill Richardson as his nominee for Commerce Secretary. “The most significant issue that we are facing right now is how do we put people back to work.”

The average work week shortened to 33.5 hours, the lowest since records started in 1964, from 33.6 hours, today’s report showed. Average weekly hours worked by production workers dropped to 40.3 hours from 40.5 hours, while overtime decreased to 3.3 hours from 3.5 hours.

Wages Rise

Workers’ average hourly wages rose 7 cents from the prior month, or 0.4 percent, to $18.30. Hourly earnings were 3.7 percent higher than in November 2007. Economists surveyed by Bloomberg had forecast a 0.2 percent increase from October and a 3.4 percent gain for the 12-month period.

U.S. automakers have been particularly hard hit as sales last month dropped to the lowest level in 26 years. The top executives of General Motors, Ford Motor Co. and Chrysler LLC this week appealed to Congress for as much as $34 billion in government assistance.

The Ann Arbor, Michigan-based Center for Automotive Research projects that a collapse of GM would lead to job losses totaling 2.5 million, including 1.4 million people in industries not directly tied to manufacturing. Chrysler yesterday announced it had cut 5,000 jobs last week.

Service companies are also slashing staff. AT&T, the largest U.S. phone company, will cut 12,000 jobs, striving to trim expenses as the U.S. economy falters, the Dallas-based company said in a statement yesterday. Citigroup said last month it plans to eliminate 52,000 jobs.

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net