Unemployment Rate Hits 7.6% as 598,000 Jobs Lost in January 2009

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Researched by Industrial Info Resources (Sugar Land, Texas)--For the third month in a row, the economic models failed the experts as unemployment exceeded what was expected. Economists had predicted there would be 524,000 jobs lost in January 2009. When the actual numbers were released by the U.S. Bureau of Labor Statistics on Friday morning, however, the actual number exceeded 598,000 jobs lost during the month, the most since the end of 1974, raising the national unemployment rate to 7.6% and begging the question, what can be done to stop this extraordinary loss of jobs?

Since November 1, 2008, more than 1.6 million jobs have been lost, bringing the total since the official beginning of the recession in December 2007 to 3.6 million lost jobs. Payrolls are being slashed left and right, with major companies such as Caterpillar Incorporated (NYSE:CAT) (Peoria, Illinois), Sony Corporation (NYSE:SNE) (Tokyo, Japan), Panasonic Corporation (NYSE:PC) (Osaka, Japan), NEC Corporation (TYO:6701) (Tokyo, Japan), Microsoft Corporation (NASDAQ:MSFT) (Redmond, Washington), Time Warner Incorporated (NYSE:TWX) (New York, New York) and many others announcing massive layoffs in recent weeks. As these layoffs take place during the coming months, the unemployment numbers are expected to continue their rise.

Employment in the manufacturing sector continued to decline, with 207,000 jobs lost in January. Consistent with the last few months, the fabricated metal products sector lost 37,000 jobs during the month. The motor vehicles and parts sector continued its decline as well with 31,000 jobs lost, and automobile dealerships dropped 14,000 jobs. The machinery sector added an additional 22,000 job losses in January. Construction jobs continued their decline as well with 111,000 construction jobs disappearing during January.

Other sectors heavily hit with job losses in January include the transportation sector, which saw 25,000 truck-transportation jobs evaporate; the transportation support sector, which lost 9,000 jobs; and courier and messenger services, which lost 4,000 jobs. The retail trade sector saw employment drop by 45,000 in January, while building material and garden supply stores lost 10,000 jobs, department stores lost 9,000 jobs and furniture and home furnishing stores lost 7,000 jobs.

As the job situation continues to deteriorate, capital spending has been declining within the Industrial Manufacturing Industry nationwide, an industry that was home to many of the jobs that have or will be cut in the near future. The automotive sector, with its well publicized cry for a bailout at the end of 2008, has virtually ceased spending capital at facilities in the U.S. On the maintenance side of the equation, automotive firms have been extending maintenance activities as much as possible and keeping their respective facilities closed for longer periods of time during scheduled maintenance periods or have simply closed plants for a week or more each month to allow demand to catch up with production.

In other sectors, such as the tech sector, the heavy manufacturing sector, and the plastics and rubber products sector, spending has also essentially come to a halt. As companies scramble to remain in business through layoffs, salary reductions and plant closures, spending is about the last thing they are considering at this time. Many of the projects that had been in the developmental stages over the past year have either been placed on hold, pushed out until 2010 as companies take a wait-and-see attitude to the economy, or have been canceled outright.

The only potential light at the end of the proverbial tunnel within the Industrial Manufacturing Industry may well be in the transportation sector. Over the past eight years, during President Bush's administration, commuter-, light- and freight-rail projects took a back seat to other federally funded projects. However, President Obama has made it clear that he is a major proponent of spending in these areas, in addition to other infrastructure-related sectors. While it will certainly take a number of months for the new administration to get policies in place and begin spending money on these types of projects, there is hope that this will occur sooner rather than later.

Overall, the job situation in the U.S. has almost reached a critical point. With almost 12 million people currently out of work and more job losses clearly on the way as companies continue plans to slim down in the coming months, some kind of plan must be put in place to stem the tide of job losses. President Obama's stimulus package, currently being debated in Congress, will be a good first step, but additional plans and billions of dollars in spending will be required if the new administration expects to turn off the job-loss valve and reverse the flow.

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.