Unemployment rate in US surging

Some 10 million out of work; Mass. among the last hit

The national unemployment rate rose last month at the fastest pace in 26 years, foreshadowing what economists fear could be the biggest increase in joblessness since the recession of the 1970s.

There are now more than 10 million Americans out of work, nearly 3 million more than a year ago, with manufacturing, construction, and retail sectors particularly hard-hit.

Massachusetts has only begun to see employment declines, after adding jobs for most of the past year. The state's strong technology, higher education, and health sciences sectors have helped it to buck national trends. But the economic slowdown is hurting demand nationally and globally for Massachusetts technology products, and the meltdown on Wall Street is battering the state's large financial services sector.

Just this week, Fidelity Investments of Boston said it would cut 1,300 jobs worldwide, or 3 percent of its workforce, which would represent 345 jobs in Massachusetts; and business software maker Egenera Inc. of Marl borough said it would cut 87 jobs worldwide, including 30 to 35 in the state. IHS Global Insight, a Waltham forecasting firm, recently projected the state could lose as many as 76,000 jobs over the next year.

The national jobless rate, which leapt four-10ths of a point to 6.5 percent in October, has already risen more than 2 percentage points since it reached a low point of 4.4 percent in early 2007. Economists expect the rate to continue to rise for more than year, peaking at about 8 percent.

Such an increase, about 3.5 points, would be the second biggest rise in unemployment in any recessionary period since 1950, according to economists at the financial services firm UBS AG. Only the recession of 1973-75, when the Arab oil embargo crippled the US economy and the jobless rate climbed 4.1 points to 8.9 percent, had a greater increase.

"Until two months ago, we were talking a mild recession," said James O'Sullivan, a UBS economist. "It's now a full-fledged recession for sure, and in the end it's going to be pretty severe."

October's surge in the unemployment rate, the biggest monthly gain since November 1982, is another sign of the economic deterioration that has followed the recent turmoil in global financial and credit markets. The US economy shrank in the third quarter, the Commerce Department reported recently, while consumer spending, which accounts for about 70 percent of economic activity, fell for the first time since 1991. Business spending is grinding to a halt.

As a result, job losses are accelerating. Employers slashed a total of more than 500,000 jobs in September and October, nearly as many as in the previous eight months, the Labor Department reported yesterday. Since January, when the current wave of losses began, the nation has shed more than 1 million jobs, and some economists forecast a loss of more than 3 million US jobs before a recovery of the labor market that is expected to begin near the end of 2009. The US shed about 2.5 million jobs in the 2001 recession.

The rapid erosion of the US labor market is an ominous sign for the economy, analysts said. Among major sectors, only government, education, and health services added jobs. Manufacturers cut 90,000 jobs; construction firms, 49,000; and retailers, 38,000. When people lose jobs, they cut spending, which reduces demand for goods and services, which in turn leads businesses to cut production and ultimately, more jobs, continuing the downward spiral.

"I suppose it could always be worse, but it seems as bad as could be expected," said Bill Cheney, chief economist at John Hancock Financial in Boston. "The only silver lining is that big job losses dramatize the situation and create the political pressure to get the government to address it."

Many economists say Congress should act before the end of the year to pass a stimulus package of tax cuts, additional unemployment benefits, and increased spending on public works to boost the economy and employment. Waiting until January, after President-elect Barack Obama and a new Congress take office, risks an even worse recession.

Yesterday, in his first news conference since winning Tuesday's election, Obama said he wants a stimulus package "sooner rather than later." If the lame duck Congress and the Bush administration fail to approve stimulus legislation, he said, "It will be the first thing I get done as president."

But, Obama added: "It is not going to be quick. It is not going to be easy for us to dig ourselves out of the hole that we are in."

Robert Gavin can be reached at rgavin@globe.com.