Gloomy jobless picture to stretch well into 2009

WASHINGTON — Americans probably suffered a net loss of 2.4 million jobs last year, with the pain likely to stretch well into 2009 and possibly beyond, underscoring the recession's toll on employers and workers and the difficulty President-elect Obama will face in reviving the economy.

Already the New Year has gotten off to a rough start, and more bad news is expected this week when the government releases data on weekly jobless claims today and December unemployment on Friday.

Just days into 2009, managed-care provider Cigna, aluminum producer Alcoa and computer-products designer Logitech International were among those announcing big layoffs as companies scramble to cut costs even deeper.

The flurry of layoffs suggests the employment picture will remain grim this year.

"Many companies have a bare-bones mentality. With labor being their biggest expense, you will see them continue to drop the ax on jobs," said Richard Yamarone, economist at Argus Research. "There is absolutely no reason to believe the economy is going to be creating jobs any time soon. There are just no reasons for companies to flick on the hiring switch."

A barometer on layoffs due out today is expected to show that the number of newly laid-off people signing up for state unemployment insurance last week rose to 540,000, up from 492,000 in the previous week, according to economists' projections.

Electronic unemployment-filing systems have crashed in at least three states in recent days amid a crush of newly jobless Americans seeking benefits.

On Wall Street, investors worried about the jobs outlook contributed to a sharp decline in stocks, as the Dow Jones industrials fell 245 points Tuesday.

For all of 2008, employers likely slashed payrolls by at least 2.4 million. That's based on economists' forecasts for a net loss of 500,000 additional jobs last month, as well as the job losses already reported every month last year by the government.

Some, however, think the number of jobs cut last month will be higher — around 600,000 or 700,000. The Labor Department will release that report Friday.

"We await Friday with trepidation," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.

With employers throttling back hiring, the unemployment rate is expected to jump from 6.7 percent in November to 7 percent in December, which would be the highest in 15 ½ years. That figure also will be released Friday.

Consumers and companies are folding under the negative forces of the collapsed housing market, a global credit crunch and the worst financial crisis since the 1930s. The recession, which started in December 2007, already is the longest in a quarter-century.

The expectation of more job losses ahead "will only perpetuate the vicious downward cycle propelling the economy," said Bernard Baumohl, chief global economic at the Economic Outlook Group.

"As the number of people without jobs accelerates, so will the retrenchment in households' spending. If consumers cut back more, business sales and earnings shrink further. The collapse in profit margins will force companies to carry out yet another round of layoffs, which only adds more momentum to the destructive cycle," Baumohl said.

Obama is proposing a mammoth $775 billion package of tax cuts and government spending over two years to revive the moribund economy. With add-ons by lawmakers, the package could swell to $850 billion, his advisers say.

"By now we all know that we are facing a crisis in our economy, one that requires immediate and decisive action to spur the creation of new jobs," Obama said Wednesday.

Even with a big government stimulus, economists still believe the unemployment rate will keep climbing, hitting 8 or 10 percent by the end of this year.

Obama's economic advisers estimate that a $850 billion recovery package would lower the jobless rate to about 7.4 percent and create 3.2 million jobs by the first quarter of 2011.

Obama, who takes over Jan. 20, said Wednesday his recovery plan would "save or create" 3 million jobs.