Coming on the heels of awful business and economic-growth reports, Friday's dismal news that the unemployment rate rose to 6.5 percent and employers shed another 240,000 jobs in October made it clear that the U.S. economy is now in recession.
The Bush administration and even Federal Reserve Chairman Ben Bernanke have been reluctant to use the R-word, but few economists dispute that the world's largest economy is officially there.
“I think it's awfully hard to say you're not in a recession at this point. Ten consecutive drops in payrolls, I think any way you look at it is a recession,” said David Wyss, chief economist for the New York rating agency Standard & Poor's.
Friday's dismal jobs report followed word last week that the economy had contracted 0.3 percent in the third quarter. A recession generally is defined as two consecutive quarters of economic contraction, and there's little dispute that the last three months of 2008 will be terrible for the economy.
Other indicators include car sales. Carmakers such as General Motors reported a 45 percent drop in sales in October, and measures of consumer confidence last month hit all-time lows. With 10.1 million people now unemployed, consumption, which drives more than two-thirds of U.S. economy activity, is sure to take an even greater hit.
“Employment has fallen by 1.2 million in the first 10 months of 2008; over half of the decrease has occurred in the past three months,” the Bureau of Labor Statistics report says. “In October, job losses continued in manufacturing, construction and several service-providing industries.”
Not only were the October job losses higher than anticipated, Labor Department statisticians sharply revised September's jobless figures.
Statisticians acknowledged that the preliminary estimate of 159,000 jobs lost that month was far off, and that there were instead 284,000 workers tossed into the ranks of the unemployed. They also revised August jobless numbers from the estimate of 73,000 to 127,000.
These revisions are significant because they suggest that the economy was suffering a steep drop even before the financial crisis exploded into a global problem in mid-September. Many of the September job losses preceded the financial meltdown.
A good chunk of the revisions reflected changes in jobs for teachers and school employees, a statistic that state and municipal governments compile and report with a lag. Another part of the revision reflected greater layoffs from small employers, who weren't captured in the broad employer sample. These small-company jobs often show up in revisions once statisticians have seen payroll and unemployment insurance information from state governments.
“It suggests that small firms did worse than expected,” Wyss said.