Job Losses Hitting All Income Levels and Sectors
The job losses in this downturn are hitting workers across all income levels and job categories, and the cuts are swifter and broader than in past recessions.
"It's a real-time recession," said Diane Swonk, Mesirow Financial's chief economist. "We've never before seen so quickly layoffs announced, and then executed."
Since Labor Day, the U.S. has lost more than a half million jobs and that number is expected to go much higher before it gets better. In October, 240,000 jobs were lost, taking the unemployment rate to 6.5 percent, its highest level since 1994.
Just this week, more than 3,000 pink slips were handed out at Goldman Sachs.
On the other end of the income spectrum, thousands of retail workers were told they would be let go as Circuit City shuts down 155 stores.
In the past several weeks, announcements of job cuts came from Mattel , Time Warner , Glaxo , Merck , Xerox and Yahoo , to name a few.
Thousands more are being cut by the auto industry and those losses are expected to rise. Ford , in reporting a third quarter loss Friday, said it would layoff another 10 percent, and General Motors , bleeding cash at a dangerous rate, said it too was cutting more workers.
Corporate America is now following the lead of Wall Street, where in the last year tens of thousands have lost jobs, many of which will never return.
The question, though, is this: As the layoffs add up, how bad will unemployment be in this recession? And what does that mean in terms of when and how the economy will recover? It really is a different job market this time, and that might be a slight positive for workers, economists say.
For one, there was no big ramp-up of new employees ahead of this economic downturn. But there are plenty of other factors that make this job environment more worrisome.
One of those issues is the fact that there's no turnaround in sight for housing, which can only aggravate job losses.
"You have a very broad-based decline in payrolls. The only good thing is that businesses did not seem to have aggressively hired during the boom. It never got to the point where there was hiring in advance or panic hiring," said Mark Zandi, chief economist at Moody's Economy.com.
That contrasts to the period prior to the dot-com bust, when companies were luring workers to Internet companies with signing bonuses.
"The other unique feature of this is how broad-based these job cuts are. In other times, they were focused in a region or two," he said.
Zandi said about 30 states are in recession, and more are close. (Click here to state budget-busted states).
"It's a much broader downturn than has been the case historically. That's an issue to how these economies can adjust to all of these shocks," he said.
Typically, people have picked up and moved to another part of the country when times have gotten tough.
Not this time, Zandi said.
"There's really no place to go. The only big economy that's doing well is Texas. Of course, the fact that so many homeowners are underwater cuts down mobility," he said.
He said the phenomena could prolong the recession. So far, more than a million jobs have been lost since the beginning of the year.
"It feels like, given the announcements, given the collapse of business confidence, we're not halfway done. At least 1.5 million to 2 million jobs will be cut in total," he said.
He expects unemployment to peak at 8 percent by the end of 2009 or early 2010.
Auto Problems Loom
The auto industry's jobs losses have already amounted to about 100,000 in the last three years and could accelerate.
GM said it was cutting off merger talks with Chrysler to focus on its financial health. That merger reportedly would have resulted in another 30,000 to 40,000 job cuts at the combined company but now the employment picture is even murkier.
(Video: CNBC's Phil LeBeau reports on government bailout discussions between automakers and Speaker of the House Nancy Pelosi)
Without a merger, a potential failure of an auto maker could have an even bigger impact as it ripples through related industries and the economy.
"The auto sector is about 3 percent of GDP. It's roughly about $450 billion," said Deutsche Bank chief U.S. economist Joseph LaVorgna. "That's the direct effect. The indirect effect is quite large."
Swonk expects unemployment to reach about 8 percent by the end of next year.
"The bottom line is labor markets are deteriorating and deteriorating rapidly," she said. "This is across regions. Across income stratas. At the end of the day, everyone is getting hit right now."
Blame the Credit Crunch
She also points to another factor that has significantly affected the job market: the constriction of credit.
"The insult to injury is you see Mervyn's going under; Sears is closing stores: Circuit City is closing stores. Usually where there is this situation, [such as] in the 1990s, it took the recession several years to show up in widespread bankruptcies at stores. Now we're seeing it accelerate."
"Credit in the past has always been a stabilizer in weak economic times. Now it's not there. It's an accelerator...This is really highly unusual how rapidly the economy is deteriorating right beneath our feet," she said.
Retail jobs typically get a seasonal lift during the holiday shopping season. This shopping season, retail employment is contracting.
(Kevin Caron of Stifel Nicolaus; CNBC commentator Bill Seidman & CNBC's Margaret Brennan discuss the market's reaction to the retail sector's downturn in thevideo)
"The economy has been weak for some time. That said, it is unusual to see this many retailers going bust before Christmas, and you know the credit crunch was an accelerant there," Swonk said.
The industries currently adding jobs are health care, educational services and, to a lesser extent, defense, said Zandi.
Big job losses have come in financial services, manufacturing and construction.
"It feels like the next six months are going to be very bad with very layoffs," he said. "It won't be until 2010 when we find our footing."
Swonk said one of the fundamental changes in the job market now is that companies have "real-time" workforces.
"We've seen a major change in events in terms of responsiveness of firms ... Even before we were in a recession, we were laying people off. That didn't used to happen," Swonk said.
Like Zandi, she pointed to the fact that companies didn't add lots of new workers going into the downturn. She said wages are more "market-adjustable" than in the past.
For instance, companies can change their labor costs by changing healthcare plan contributions, or shifting hourly workers to salary. That might save head count.
"You don't have to cut workers to cut your wage burden," she said.
Another factor is the move by companies to have just-in-time inventories. In past recessions, companies slashed workers when inventories piled up. In this recession, for the most part there is no inventory issue.
"There have been some major structural changes in the way large-scale employers respond to the economy," Swonk said.
As a result, small businesses make up a bigger part of the work force than they used to, and they had been bigger drivers of new job growth.