US jobless rate worsens to 6.5% as cuts beat forecasts

By Bob Willis  |   2008-11-8  |     NEWSPAPER EDITION

THE United States jobless rate climbed last month to the highest level since 1994 and payrolls dropped by 240,000 workers, signaling the economic slump inherited by Barack Obama will last well into his first year as president.

The unemployment rate rose to 6.5 percent from 6.1 percent the previous month, the Labor Department reported yesterday in Washington. The job cuts exceeded forecasts and followed a revised loss of 284,000 in September, bringing the two-month decline in payrolls to more than half a million.

Unemployment may only worsen by the time Obama takes office in January, making it easier for congressional Democrats to push through another economic stimulus package.

Obama met yesterday with his transition economic group, including billionaire investor Warren Buffett and former Federal Reserve Chairman Paul Volcker.

"Labor-market prospects are bleak and likely to get bleaker," Chris Rupkey, chief economist at Bank of Tokyo- Mitsubishi UFJ Ltd in New York, said before the report. "This raises the stakes for Obama to move faster than ever to have economic stimulus programs in place and the staff to implement them the minute he takes office, if not before."

Payrolls were forecast to drop by 200,000 after declining by a previously estimated 159,000 in September, according to the median of 78 economists surveyed by Bloomberg News.

Estimates ranged from declines of 85,000 to 300,000. Last month's unemployment rate compared with a projected 6.3 percent and was the highest since March 1994.

Job losses for August and September were revised up by 179,000. The economy has lost 1.18 million jobs so far this year.

Factory payrolls fell 90,000, the biggest monthly loss since July 2003, after decreasing 56,000 in September. A strike by 27,000 machinists at Boeing Co, which was resolved earlier this month, contributed to the drop, the Labor Department said.

Economists had forecast a drop of 65,000 manufacturing jobs. The decrease included a loss of 9,100 jobs in auto manufacturing and parts industries.

Yesterday's report also reflected the housing slump and credit crunch. Payrolls at builders dropped 49,000 after decreasing 35,000 in September. Financial firms reduced payrolls by 24,000 workers, after a decline of 16,000 in the prior month.