The U.S. economy lost more than half-a-million jobs in the final month of the year, and though the cutback doesn't match the damage seen in November, unprecedented losses in the fourth quarter helped to make 2008 the worst year for employment since 1945.
In the final quarter alone, 1.9 million jobs vanished from the economy. November was the worst month for employment, with 584k jobs disappearing - the steepest decline since late 1974 - followed by December, which saw the economy shrink by another 524k jobs.
"As in recent months, the losses were spread across virtually every sector, with only government placing help-wanted signs for educators, health care workers and administrators," said BMO senior economist Sal Guatieri.
Since the recession began in December 2007, the total labour force had dropped by 2.6 million jobs, driving the unemployment rate from 4.9% at the start of the year to 7.2% now - a 16-year high.
"More worryingly, two-thirds of these job losses occurred in the last quarter of 2008, which does bode poorly for 2009 as it indicates that the pace of layoffs has clearly accelerated," said Millan Mulraine, economist at TD Securities.
Dismal as the news was, markets were actually relieved by the December figures, as an unofficial employment report from Wednesday had suggested that 700k jobs were lost in the private sector alone.
"With the loss in non-farm payrolls failing to live up to the whisper let alone match Wednesday's ADP figure, the USD and Dow futures rallied," said analysts at the Bank of New York Mellon. Within minutes of the release, the EUR/USD fell to 1.3546 from 1.3710, the GBP/USD dropped a full cent to 1.5200, and the USD/JPY surged as high as 91.66 from 90.95.
"The disproportionate impact of this report in foreign exchange markets was on the EUR, as it lost ground not only against the USD but also against the GBP," the analysts wrote, noting the report "provided a convenient excuse to continue selling EUR/GBP, taking it to a session low of 0.8904 by 9:20am from 0.8940 following the report and an overnight high of 0.9047."
Paul Ashworth, senior economist at Capital Economics, said the December losses weren't as terrible as many feared, but revisions to October and November subtracted another 154k jobs from the economy, providing a stark illustration of a severe recession. He noted the current three month average for job losses was -510k, the worst figure in five decades.
In 2008 as a whole, the private sector saw 2.77 million jobs disappear from the economy. Goods-producing jobs fell by 1.36 million as consumption plummeted in the second half of the year, construction jobs declined by 630k as home-builder sentiment plummeted to new lows, and manufacturing jobs dropped by 800k as a result of falling demand from abroad.
Looking ahead, many economists remain deeply pessimistic about the first half of 2009.
"During the first few months, the magnitude of the job losses will be at least as large as the November and December drops," said Nariman Behravesh, chief economist at IHS Global Insight. He noted that even with a large fiscal stimulus package, net job creation won't begin until early 2010.
Rob Carnell, chief international economist at ING Wholesale Banking, offered an even more pessimistic outline. "At this pace, the unemployment rate could well test double digits later this year, and certainly looks well on course to do so during 2010 at the latest," he said.
President-elect Barack Obama reacted to the jobs report by saying it underscores the need for immediate government action.
Data Recap
The loss in total private jobs was a whopping 531k in December. The goods-producing sector lost 251k and the service sector slashed 273k jobs. Construction fell by 101k, and manufacturing lost 149k jobs. The business services sector lost 113k jobs, while the financial sector fell by 14k jobs.
For the third straight month, the only gains seen in the month were in areas outside the business cycle. Government jobs increased by 7k and education & health care advanced by 45k.
Average hourly earnings rose 0.3% in December for a total gain of 3.7% in 2008. Average weekly earnings fell by 0.3% on the month and rose 2.2% annually.
Total employment in the United States fell by 806k to 143.338 million in December. The employment-population ratio fell four-tenths to 61.0%. The civilian labour force dropped by 173k to 154.447 million in December, and the labour force participation rate moved down one-tenth to 65.77%.
By Patrick McGee and edited by Sarah Sussman
©CEP News Ltd. 2009