US employers probably cut the most jobs in at least 34 years last month as the global economic crisis gathered pace and moves by policy makers took time to filter through to struggling companies.
The US government jobs reports due on Friday will provide the latest grim assessment of a global financial crisis that has sparked a wave of policy measures from countries worldwide, the latest being interest rates cuts by South Korea and Britain.
US President-elect Barack Obama warned the US economy could stay mired in recession for years without further bold action, though he gave few new details about a package of tax cuts and public-works spending now likely to cost $800 billion or more.
“I don't believe it's too late to change course, but it will be if we don't take dramatic action as soon as possible,” Obama said in a speech on the economy at George Mason University in Fairfax, Virginia on Thursday.
“If nothing is done, this recession could linger for years. The unemployment rate could reach double digits.”
Underlining Obama's fears, the US non-farm payrolls report for December, due later on Friday, is expected to show that 2008 produced the biggest job losses since demobilization following World War Two.
For December alone, job cuts are expected to amount to 550,000, the most for a single month in 34 years, taking the unemployment rate to 7%.
Indeed, a report earlier this week showing December job losses in the private sector of close to 700,000 raised fears the more comprehensive government report would be worse that expected.
Financial markets were on hold ahead of the key jobs data, with Asian shares easing slightly and government bonds ticking higher as investors anticipated a weak jobs number.
Along with trillions of dollars in government stimulus packages, central banks are cutting interest rates to unprecedented levels in an effort to kickstart growth and stem a rising tide of job losses.
The Bank of England cut its benchmark rate by 50 basis points to 1.5% on Thursday, the lowest level since the central bank was created in the 17th century. It said the world economy appeared to be undergoing an unusually sharp and synchronized downturn.
“Measures of business and consumer confidence have fallen markedly. World trade growth this year is likely to be the weakest for some considerable time,” the British central bank said in a statement.
The Bank of Korea on Friday cut its rate by 50 basis points to a record low of 2.5% and warned Asia's fourth-largest economy was weakening rapidly, hurt by a slump in both export demand and domestic consumption.
If proof was needed, Ssangyong Motor Corp, the country's fifth-largest carmaker, said it had filed for court protection, after its sales more than halved in December from year earlier.
Top US automaker General Motors Corp, which won a $13.4 billion federal bailout to avoid a similar demise, said on Thursday it was confident it would win concessions from its main union to meet the conditions of its rescue package.
Credit rating firm Moody's Investors Service said it has put Honda Motor Co Ltd's debt rating on review for a possible downgrade due to shrinking demand.
Mounting job losses across a wide range of industries are the latest and arguably most worrying developments in a financial crisis spawned in the collapse of the US mortgage market a year and a half ago.
Worried about their jobs, consumers are reining in spending, deepening the slowdown.
Wal-Mart Stores Inc and other top US retailers delivered disappointing December same-store sales and profit warnings on Thursday, confirming the worst holiday shopping season in nearly 40 years.
Wal-Mart, the world's largest retailer, surprised investors who have seen it outperform rivals as the store of choice in a downturn.
Its US December same-store sales rose 1.7%, excluding gasoline - worse than Wall Street's expectation of a 2.8% increase. It cut its fourth-quarter profit forecast.
The International Council of Shopping Centers said holiday sales, which include November and December, fell 2.2% - the weakest result since it began compiling such data in 1970.
Other regions are also struggling with the global crisis.
Chinese business confidence plunged in the final three months of 2008 as the financial crisis weighed on exports and industrial output.
Manufacturing orders in Germany, Europe's biggest economy, dropped by a much bigger-than-expected 6% in November, hit by collapsing demand at home and abroad.
Exports fell by an unprecedented 10.6% in November as demand for cars and other mainstays of the manufacturing economy plummeted, reinforcing expectations of a deep interest-rate cut by the European Central bank on January 15.
In Spain, unemployment topped 3 million for the first time and is expected to rise further in 2009, the government said.
In response to the crisis, the leaders of France and Germany called for a complete overhaul of the financial system and French President Nicolas Sarkozy said the United States should no longer be allowed to dominate the debate.
They said new institutions are needed to prevent a repeat of the financial crisis and make possible a fairer form of capitalism that does not lead to imbalances in wealth and the world economy.
“Enormous imbalances have appeared ... Purely financial capitalism has perverted the logic of capitalism,” Sarkozy said. (Reuters)