WASHINGTON // The US unemployment rate bolted to a 14-year high of 6.5 per cent in October as another 240,000 jobs were cut, the government said today. It was stark proof the economy is almost certainly in a recession. The worse-than-expected jobs report shook Wall Street's resolve to rebound from a two-day selloff. The new snapshot, released by the Labour Department, shows the crucial jobs market deteriorating at an alarmingly rapid pace. The jobless rate zoomed to 6.5 per cent in October from 6.1 per cent in September, matching the rate in March 1994.
Employers have cut jobs each month this year. Unemployment has now surpassed the high seen after the last recession in 2001. The jobless rate peaked at 6.3 per cent in June 2003. Employers got rid of 240,000 jobs in October, marking the 10th straight month of payroll reductions. Job losses in August and September turned out to be much deeper. Employers cut 127,000 positions in August, compared with 73,000 previously reported. A whopping 284,000 jobs were axed last month, compared with the 159,000 jobs first reported. So far this year, a staggering 1.2 million jobs have disappeared. The employment market is much weaker than economists expected. They were forecasting the unemployment rate to climb to 6.3 percent in October and for payrolls to fall by around 200,000.
When people lose their jobs, they tend to pare back family budgets and fall behind on their debt - not a promising prospect for an economy suffering a simultaneous credit crisis and spending slowdown. While Barack Obama's election to the White House was preceded by a big rally, and then followed by a two-day loss of about 10 per cent in the major indexes, Dow Jones industrial futures slipped 7, or 0.08 per cent, to 8,693, after rising more than 100 in earlier trading.
Standard & Poor's 500 index futures added 4.50, or 0.50 percent, to 909.00, and Nasdaq 100 index futures rose 16.75, or 1.35 per cent, to 1,257.25. Yesterday was Wall Street's second straight day of massive losses - this time set off by Cisco Systems Inc.'s warning about waning demand and retailers posting dismal sales figures for October. Today, the dollar fell against most other major currencies, while gold prices rose. Light, sweet crude rose 23 cents to $61.61 a barrel in premarket trading on the New York Mercantile Exchange. The three-month Treasury bill's yield was at 0.33 per cent, up modestly from 0.30 per cent late yesterday.
A low yield suggests high demand for safe assets. Bank-to-bank lending rates fell again, though, suggesting that banks are more willing to lend to one another - a positive signal for the tight credit markets. The London interbank offered rate, or Libor, for three-month loans in dollars dropped for the 20th straight day by 0.10 per cent to 2.29 per cent, the lowest level since November 2004. In Asian trading, Japan's Nikkei index fell 3.55 per cent, and Hong Kong's Hang Seng Index rose 3.29 per cent. In afternoon trading in Europe, Britain's FTSE 100 rose 0.76 per cent, Germany's DAX index rose 0.01 per cent, and France's CAC-40 fell 0.12 per cent.