The US Labor Department was to release yesterday a report that was expected to show the biggest monthly jobs loss in 26 years, piling more pressure on the Federal Reserve to slash rates again and adding urgency to an automaker bailout as the global economic crisis deepens.
After bolting to a 14-year high of 6.5 percent in October, the unemployment rate likely climbed to 6.8 percent last month, according to economists’ forecasts. If they are right, that would mark the worst showing in 15 years.
Skittish employers, which have slashed 1.2 million jobs this year alone, probably cut another 320,000 last month, economists forecast.
If that estimate is correct, it would represent the deepest cut to monthly payrolls since October 2001, when the economy was suffering through a recession following the Sept. 11 terrorist attacks.
Investors have been nervous about the fate of the cash-starved US auto industry, the failure of which would hit a chain of parts suppliers and financiers that spans the world.
“Concerns have spread that financial institutions, including Japanese ones, wouldn’t be able to escape unscathed if big US automakers were to go bankrupt,” said Tsuyoshi Segawa, an equity strategist at Shinko Securities in Tokyo. “We have no idea where and what could happen if a huge corporation like them failed.”
Other firms such as US phone company AT&T Inc, Swiss bank Credit Suisse and Japanese brokerage Nomura Holdings Inc were already cutting their work force by thousands, bracing for a long and hard global recession.
Ahead of the latest employment data, dealers priced in a three-in-five chance Fed would cut rates by 75 basis points to 0.25 percent on Dec. 16.
US Fed Chairman Ben Bernanke is exploring other economic revival options and wants the government to step up efforts to curb home foreclosures. Treasury Secretary Henry Paulson, the overseer of a US$700 billion financial bailout program, is also weighing new initiatives, even as his remaining days in office are numbered.
Central banks throughout Europe and Asia have slashed rates aggressively this week, with other more radical actions expected, as policymakers raced to stabilize financial markets and stop deflationary forces from getting further out of control.
The European Central Bank dropped its benchmark rate by 0.75 percentage point to 2.5 percent, the eurozone’s biggest cut ever.
Sweden lopped a record 1.75 percentage points off its policy rate to 2.0 percent, while the Bank of England chopped rates by 1 percentage point to 2 percent, the lowest level since 1951.
In addition to slashing borrowing costs, central bankers have been considering more direct actions to protect their economies. After cutting rates, the Bank of England is mulling buying up government debt and flooding markets with cheap cash to prevent a more severe recession, an unsourced report from the Daily Telegraph newspaper said.
Governments were trying to align their efforts with the deluge of central bank rate cuts.
South Korean officials said that if needed more help was on the way to the economy and financial markets.
“Aggressive countermeasures are required for the automobile, semiconductor and petrochemical sectors due to a rapid decline in export demand, falling export prices, an intensifying global competition and a supply glut,” the Ministry of Knowledge Economy said in a report.
France announced a 26 billion euro (US$32.9 billion) stimulus plan targeting infrastructure and investment projects for its faltering economy as data showed the unemployment rate rose in the third quarter to 7.7 percent..
Time was of the essence though, as economic data globally reflected rapidly worsening conditions.
“I believe we could lose General Motors by the end of this month,” Ron Gettelfinger, president of the United Auto Workers told lawmakers. “Honestly, we’re down to the wire.”
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