In yet another sign of the trouble economy that will face a new President Barack Obama and his advisers: the jobless rate in October soared as unemployment hit a 14 year high:
The American economy lost another 240,000 jobs in October, the government reported Friday, as cash-strapped consumers pulled back sharply and businesses hunkered down, intensifying the distress gripping much of the country.
The unemployment rate spiked to 6.5 percent from 6.1 percent, the highest level since 1994. Many analysts now expect unemployment will reach 8 percent by the middle of the year.
Coupled with revisions to September’s data — which now show a loss of 284,000 jobs, down from an initial estimate of 159,000 — the economy has shed 1.2 million jobs since the beginning of the year. More than half the job losses have been in the last three months alone.
“The economy is slipping deeper into a recessionary sinkhole that is getting broader,” said Stuart G. Hoffman, chief economist at PNC Financial Services Group in Pittsburgh. “The layoffs are getting larger, and coming faster. We’re likely to see at least another six months of more jobs reports like this.”
But this news came couple with another bit of bad news, which comprised a double-whammy:
Battered by an ailing economy and until-recently high gas prices, General Motors has announced that it could run out of money by the first half of next year unless the national situation improves or it gets government help:
General Motors Corp. (GM) warned Friday that it risks running out of cash in the first half of next year without government intervention or a reversal of weakening market conditions.
GM also indicated that merger talks with Chrysler LLC had ended, stating that the “possibility of a strategic acquisition” had been set-aside to focus on liquidity.
Without government intervention, a significant increase in auto sales or ” substantial” proceeds from asset sales, GM said its cash on hand will reach critical levels by the end of 2008, after burning through another $6.9 billion in the September quarter.
GM shares were down 11.9% at $4.23 following the delayed earnings release.
Meanwhile, Obama has met with a group of economic advisers:
President-elect Barack Obama convened a new economic advisory board to meet here on Friday as he moves to swiftly fill top administration posts and form his response to the economic crisis.
With the global economy on a knife’s edge, and labor figures showing mounting American job losses, the financial markets, foreign leaders and even the Bush administration are looking to Mr. Obama for signs of how he will manage the crisis.
In responding, Mr. Obama must strike a delicate balance between cooperating with an unpopular president whose policies he campaigned to change, and the inclination to wait until he takes charge in two and a half months to prescribe his own remedies.
Moving quickly on the transition, Mr. Obama announced his selection on Thursday of Representative Rahm Emanuel as his White House chief of staff. The president-elect said he had made that choice because Mr. Emanuel had “deep insights into the challenging economic issues that will be front and center for our administration.”
In a long list of forthcoming appointments, aides said, Mr. Obama is acting with the greatest urgency toward choosing a Treasury secretary and is said to be considering Lawrence H. Summers, who held the post during the Clinton administration, and Timothy F. Geithner, president of the New York Federal Reserve Bank.
This New York Times piece notes that no modern American president “has been so pressured to begin governing, in effect, before he is sworn into office.”
Joe Gandelman is a former fulltime journalist who freelanced in India, Spain, Bangladesh and Cypress writing for publications such as the Christian Science Monitor and Newsweek. He also did radio reports from Madrid for NPR’s All Things Considered. He has worked on two U.S. newspapers and quit the news biz in 1990 to go into entertainment. He also has written for The Week and several online publications, did a column for Cagle Cartoons Syndicate and has appeared on CNN.