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Economy Sheds 600,000 Jobs in January

Three-month Job Loss Worst Since Great Depression
by Adam Price |
February 11, 2009
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San Jose, CA - On Feb. 6 the Labor Department reported that 598,000 jobs were lost in January and at the same time revised upwards their report on job losses for November and December. The January report marked the first time since 1939 that the economy has lost more than a half a million jobs for three months in a row. The economy has now lost more than 3.5 million jobs since the recession began in December 2007; half the job losses have been in the last three months alone.

In January, the official unemployment rate also increased to 7.6%, from 7.2% in December. This is the worst unemployment rate since the 1992. The official unemployment rate does not include jobless workers who ‘drop-out’ of the labor force by not looking for work. There were hundreds of thousands who left the labor force in the last three months. Nor does the official unemployment rate count workers who are forced to work part-time because of the poor economy. A broader measure of unemployment, including forced part-timers and jobless workers who didn’t look for work because of the bad economy or other reasons rose to 13.9%.

Hardest hit by rising unemployment in January were African Americans. Their unemployment rate rose by seven-tenths of one percent, from 11.9% in December to 12.6% in January. This was about twice the unemployment rate for whites.

There was also a rapid rise in people collecting unemployment insurance benefits in January. On Feb. 5, the Labor Department reported that 626,000 people filed new claims for unemployment insurance in the last week of January, the most since 1982. 4.8 million people were collecting state unemployment insurance benefits, the largest number on record in the last 40 years. An additional 1.7 million people are collecting the Federal Emergency Unemployment Compensation (EUC) benefits, for a total of 6.5 million people collecting unemployment insurance.

The rapid rise in unemployment is taking a toll on unemployment insurance programs. Seven states have spent their entire unemployment insurance trust fund and have had to borrow $2.3 billion from the federal government to pay benefits. If unemployment continues to rise at the current rate, another 23 states will need to borrow from the government, raise taxes or cut benefits. In many cases this lack of funds is due to cuts in state business taxes that pay for unemployment insurance that were made during the Bush years. While the proposed Obama economic stimulus package will aid the long-term unemployed and part-time workers who are laid off, it will not directly help the regular state unemployment benefits programs.

Workers and unions will have to be on the lookout for attempts by state governments to cut unemployment benefits. The business lobby will argue that higher taxes needed to pay for the benefits will hurt jobs. But why should jobless workers have to pay for the tax cuts given to businesses? Tax cuts for businesses and the wealthy, along with deregulation, helped to get us into this economic mess. More of the same old Bush-era policies will only make things worse.