Congress moves to aid Big 3
Swift agreement after report US lost 500,000 jobs
The stunning loss of more than 500,000 American jobs last month pushed Democratic congressional leaders to say yesterday they were ready to provide a short-term rescue plan for the cash-strapped American automakers and expected to hold votes on the legislation during a special session next week.
The job losses reported yesterday by the Labor Department, the most in a single month since the end of 1974, mean that a recession already expected to be the longest since World War II will become even worse, requiring the federal government to stimulate the economy with a spending package approaching $1 trillion, analysts said.
Details of the rescue package for the automakers were not immediately available, but senior congressional aides said it would include billions of dollars in short-term loans to keep the automakers afloat at least until President-elect Barack Obama takes office. Senior aides said the money would probably come from $25 billion in federally subsidized loans intended for developing advanced fuel-efficient cars. Reuters reported the amount of the bailout as between $15 billion and $17 billion.
House Speaker Nancy Pelosi had resisted using $25 billion set aside for loans, which was approved as part of an energy bill last year, and Democrats had called repeatedly on the Bush administration or the Federal Reserve to act unilaterally, using existing authority, to aid the auto companies.
Yesterday, Pelosi said she would allow that money to be used, provided "there is a guarantee that those funds will be replenished in a matter of weeks" and that there was no delay in working toward higher fuel efficiency.
Word of a breakthrough came as Congress wrapped up two days of hearings at which lawmakers grilled the chief executives of the companies, Chrysler, Ford, and General Motors, and specialists warned that GM could collapse by the end of this month.
In congressional hearings, Representative Barney Frank, chairman of the House Financial Services Committee, warned of a disaster if the federal government failed to help automakers.
November's job losses represent "a staggering number," Frank, a Massachusetts Democrat, said in an interview. "There's a pretty clear consensus that we have to do something for the automakers, and we need an economic recovery plan in the hundreds of billions of dollars."
Obama, who has called on the next Congress to pass a massive stimulus plan he can sign soon after he takes office next month, said the economic crisis provides an opportunity to spend on roads, schools, and alternative energy to boost the economy.
"Now is the time to respond with urgent resolve to put people back to work and get our economy moving again," he said in a statement.
President George Bush, speaking at the White House, said efforts to restore the flow of credit to businesses and consumers are beginning to work, which will help the economy.
"My administration is committed to making sure the economy succeeds," he said.
The Labor Department reported yesterday that US employers not only cut 533,000 jobs last month, but that job losses in October and September were worse than initially estimated.
The economy has shed more than 1.2 million jobs in the last three months alone and nearly 2 million since the recession began a year ago, with the impact being felt across the country and in nearly every major sector. Education and health services, natural resources and mining, and government were the only sectors to add jobs in November. Analysts said job losses in December could exceed last month's losses.
"Layoff announcements have accelerated, so it's probably going to be worse," said Diane Swonk, chief economist at Mesirow Financial, a Chicago investment firm. "This recession is so broad-based, Wall Street to Main Street, coast-to-coast."
The employment report also contained ominous signs for Massachusetts, which will report its November employment numbers in about two weeks. Professional and business services, a key employment sector in Massachusetts, suffered steep losses nationally in November, shedding nearly 140,000 jobs.
The sector - which includes lawyers, accountants, consultants, and technical firms - has an even greater impact on the state economy by virtue of the high salaries paid by many of these firms, said Gus Faucher, director of macroeconomics at the website Moody's Economy.com of West Chester, Pa.
"The industry has been holding up pretty well," Faucher said, "but it's really going to take a hit."
The national unemployment rate rose from 6.5 percent in October to 6.7 percent last month, the highest since 1993. The rate would probably have been much higher if hundreds of thousands of discouraged workers had not given up searching for work, economists said. Only those actively seeking jobs are counted as unemployed.
"Is there any silver lining in today's report?" said Bill Cheney, chief economist at John Hancock Financial in Boston. "In a word: no."
Economists expect the recession to last until at least the middle of next year and possibly until the end of 2009. They also expect the Federal Reserve to cut its benchmark short-term interest rate by half a point, reaching an all-time low of 0.5 percent, when policy makers meet later this month. By the beginning of next year, some economists said, the rate, which sets the amount banks charge each other for overnight lending and influences many other borrowing rates, could be cut to zero.
Federal Reserve chairman Ben Bernanke recently suggested in a speech in Austin, Texas, that the Fed is considering additional actions to lower interest rates for mortgages and other long-term loans. Businesses finance expansions with long-term borrowing, and consumers use long-term loans buy homes, cars, and other big-ticket items.
The Fed's actions need to be supplemented by a federal spending package of anywhere from $500 billion to $1 trillion, analysts said. Such a measure could include tax cuts, money for roads and bridges, extended benefits for unemployment, increased aid to states, and incentives for buying homes and cars.
Stock markets rallied yesterday in hope that the end of the recession may soon be in sight. The Dow Jones industrial average gained 259.18 yesterday to close at 8635.42.
Foon Rhee of the Globe staff contributed to this report. Material from The New York Times and Reuters was also used. Robert Gavin can be reached at rgavin@globe.com. 