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Published: Feb 6, 2009
600,000 Jobs Lost: Economy Sheds Jobs In January
by Staff

U.S. employers slashed 598,000 jobs in January, the deepest cut in payrolls in 34 years as the national unemployment rate shot up to 7.6 percent, according to a Labor Department report on Friday that underlined a deepening recession.

KEY POINTS: * January's job losses were worse than the 525,000 that had been forecast by Wall Street economists, who also had expected the unemployment rate to come in lower at 7.5 percent. * Last month's job reductions were the largest since 602,000 in December 1974, while the jobless rate reached its highest level in more than 16 years. * January's losses followed upwardly revised cuts of 577,000 in December and 597,000 in November. * The manufacturing sector bled jobs at the sharpest rate during January in more than 26 years, shedding 207,000 workers after cutting 162,000 in December.

COMMENTS:

CARY LEAHEY, ECONOMIST, DECISION ECONOMICS, NEW YORK:

"The report is awful. It's even worse than it looks because retailers did not hire workers prior to Christmas, but they still did enormous layoffs after Christmas. Firms are now suffering under the burden of excess inventories and every where you look in the report you see declines in almost every industry.

"The unemployment rate rising to 7.6 percent puts additional pressure on Congress to pass a stimulus bill and it appears that the Senate, which is not only trying to reduce the total size of the stimulus bill, but to pour in more tax cuts, is probably going to work very hard to get something passed this weekend so they can get a compromise bill done by the recess in mid-February. The changes the Senate is making are additional tax breaks given to people thinking about buying cars, a homeowners' tax break that may be worth as much as $15,000 and finally a one-year extension of the alternative minimum tax fix. The bill will contain a lot of aid to the states, but not as much as the House version."

SEBASTIEN GALY, SENIOR CURRENCY STRATEGIST, BNP PARIBAS, NEW YORK:

"The jobs report is extremely weak especially if you look at the details. This is a disappointment since markets were hoping for a rebound given that the risk indicators were easing a bit. Overall, while the report is bad for the U.S. economy, it's good for the U.S. dollar because everybody buys the dollar when everything is under pressure. This should also put pressure on risky assets."

TONY CRESCENZI, CHIEF BOND MARKET STRATEGIST, MILLER, TABAK & CO, NEW YORK:

"The preparedness of the markets for bad news is extraordinarily high, historic in fact. That means the reaction today won't be what one would expect given the data. The trend that's developing will continue -- higher Treasury yields, tighter spreads, a range bound stock market. So I think the trends are intact. The issue of the banks now becomes front and center."

ROBERT MACINTOSH, CHIEF ECONOMIST, EATON VANCE MANAGEMENT, BOSTON:

"It kind of what we expected, the same old, same old. Tons of jobs lost and unemployment goes up. It is just another confirmation that we are in a deep and long recession, and the bottom is not even in sight. Manufacturing is incredibly weak -- it is going to be a long haul."

NIGEL GAULT, DIRECTOR, U.S. ECONOMIC RESEARCH, GLOBAL INSIGHT, LEXINGTON MASSACHUSETTS:

"These are huge, huge declines. The hit this month seemed to be pretty much everywhere.

"Absolutely it does raise the stakes here. Hopefully it will concentrate some minds in the Senate so they can come to an agreement (on a stimulus package)."

GARY THAYER, SENIOR ECONOMIST, WACHOVIA SECURITIES, ST. LOUIS, MISSOURI:

"January job losses were worse than expected and occurred across the board. The only place we saw any improvement was in education and government. The private sector clearly is pulling back. Companies are cutting costs to bring expenses into line with weak sales and workers are on the front line of that cost cutting. In nearly every sector there's bad news. The only bright spot is that businesses are able to increase productivity which is a forerunner for restoring profitability. But for now, employees are paying the cost."

SUBODH KUMAR, CHIEF INVESTMENT STRATEGIST, SUBODH KUMAR & ASSOCIATES IN TORONTO:

"The numbers seem to be roughly in line with consensus. I think the things to watch are 3 million jobs lost in 2008, and an unemployment rate well above 7 percent right now. With that kind of unemployment rate, clearly customers are in an area of being frugal. If this continues, the consumer will stop spending, not just be frugal anymore.

"I think these numbers put added urgency to the package in Washington. Some of the discussion seems to be that we can take our time with the package, I think the unemployment rate will create urgency to get something through now rather than a more balanced package later. I think the markets will be watching what happens with the package very closely now."

GREG SALVAGGIO, VICE PRESIDENT, TRADING, TEMPUS CONSULTING, WASHINGTON:

"It gets worse and worse and worse. The economy is just falling into oblivion, and it will get worse. What this does is puts the focus on the Senate debate. Everyone across markets is watching Washington. If Obama has difficulty getting this bill passed, then how will be he get Geithner's plans approved, which are supposed to roll out next week? The quagmire that could develop has people worried. What this number does is sharpen Obama's attack, letting him say we have to act now."

MARKET REACTION: STOCKS: U.S. equity index futures fall, then reverse course to move higher after data. BONDS: U.S. short-dated Treasury debt prices pare gains, long-dated Treasuries extend losses. DOLLAR: U.S. dollar extends losses versus euro.

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