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| Alternatives: Rudy Almaraz, a Ford employee, checks out a job fair at his plant in Livonia, Mich. The automaker has offered
buyouts to hourly workers. Carlos Osorio/AP |
Job losses' ramifications far-reaching
Some expect Fed to cut rates by three-quarters of a point.
from the March 10, 2008 edition
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Many in the credit markets are convinced that the Fed will drop interest rates sharply when it meets March 18.
"I expect a half-a-point drop, but the bond market is already pricing in a three-quarter-of-a-point drop," says Richard DeKaser, Washington-based chief economist at National City Corp., a Cleveland bank. "There is even a small possibility of a full percentage-point drop."
Even the prospect of a significant decline in interest rates has done little to help Wall Street. For the week, the Dow Jones Industrial Average fell 372.70 points to 11893.69. The Dow is down more than 1150 points for the year.
Despite the prospect of declining demand for petroleum products in the United States as the economy slows, the price of oil has continued to march higher. On Friday, it closed at $105.15 a barrel.
"There is no question high energy prices are an additional drag on the economy," says Mr. Vitner.
A close look at labor numbers seems to indicate that the downturn in hiring is hitting younger Americans the hardest. Over the past year, workers between the ages of 35 and 44 have seen their employment drop 2.1 percent, according to the Center for Economic and Policy Research (CEPR) in Washington. Even younger workers fared worse, as those between ages 20 and 24 saw their employment drop 3.5 percent. Teenage employment fell 6.2 percent.
"Layoffs are usually based on reverse seniority, so maybe someone who has held a job for 10 to 15 years holds on to their job when younger workers don't," says Dean Baker, codirector of CEPR.
Last month, layoffs spread beyond the housing sector and financial institutions. The durable-goods business lost 40,000 jobs. In the auto industry, 12,900 jobs disappeared. In the past year, employment in that industry shrank by some 75,500 jobs.
Short-term prospects for the auto industry are not good, since a strike is under way at Detroit-based American Axle & Manufacturing, Vitner says. The strike, which started on Feb. 26, is affecting 20 plants. Last Thursday, for example, General Motors said it would reduce work at eight facilities.
"The strike is putting more pressure on the auto companies," Vitner says.
Jobs in the retail sector are also being eliminated. Last month, 34,100 jobs were shed. The losses have been particularly noticeable for clothing stores, which have reduced employment by 29,500 jobs since October.
The drop in retail jobs may reflect a drop in consumer spending, after adjusting for inflation.
"With energy prices high, there has been a real drain on discretionary income," Mr. DeKaser says.
The loss of jobs won't alleviate problems in the housing sector. Until recently, a strong labor market was a main factor driving up incomes. Now, a rising tide of layoffs could exacerbate mortgage problems, DeKaser worries. "The labor market was the last bulwark on foreclosures," he says. "Increasingly, those on the margin will find the lack of jobs makes it all the more difficult to keep up with their house payments."
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