The pink slips are piling up, and jobs are getting a lot harder to find. That’s the unmistakable conclusion of the U.S. government’s employment report for December.
According to federal statistics, just 18,000 new jobs were created last month, and the overall unemployment rate jumped from 4.7 percent to 5 percent, the largest spike in joblessness since the aftermath of the September 11 attacks in 2001.
Overall, the U.S. economy added 1.3 million jobs in 2007, nearly half the number for 2006. The tiny jobs gain of December — the smallest increase in four years — led to a rise in the jobless rate that economist and New York Times columnist Paul Krugman called “brutally bad.”
In manufacturing alone, 31,000 jobs were eliminated in December, bringing the total loss of factory employment in 2007 to 212,000. Many of the jobs that disappeared were good-paying positions permanently eliminated by the Detroit automakers. What’s more, unemployment in the construction industry, hammered by the housing crisis, hit 9.4 percent in December.
Over the entire year, the unemployment rate rose 0.6 percent–which means 895,000 more people are out of work. As always, Blacks and Latinos were the first to lose their jobs. The African American unemployment rate in December hit 9 percent, and 6.3 percent of Latinos were out of work.
If current trends continue, joblessness is likely to get worse. “Though December’s net gains were the lowest [of 2007] . . . payroll growth has slowed since June, adding an average of 84,000 jobs per month, compared to 147,000 January-May of this year,” wrote Jared Bernstein of the Economic Policy Institute.
“Less than half of private-sector industries were expanding last month, the worst showing in over four years. The private-service sector, the core sector of job growth in our economy, added only 62,000 jobs last month, its lowest month since October 2005. Also, there was a very large jump–from 4.5 million to 4.7 million, the highest level in over four years–in persons working part-time who were unable to find full-time jobs.”
Long-term joblessness is on the rise, too. “The percentage of unemployed workers who have remained without a job for more than 26 weeks (the normal duration for regular unemployment benefits) and continue to search for work is considerably higher than on the eve of the last recession,” wrote economist Chad Stone of the Center on Budget and Policy Priorities. “In December 2007, 17.5 percent of all unemployed workers were long-term unemployed, compared with just 11.1 percent in March 2001.”
But some of the unemployed don’t have to worry about benefits running out. They’ve got enough money to last a lifetime. A whole lot of lifetimes, in fact.
Consider Charles Prince, CEO of Citigroup until the board of directors demanded his scalp for plunging the biggest bank in the U.S. into the center of the sub-prime mortgage crisis. Given the scale of the debacle at Citigroup–where the losses are still mounting–it’s not at all clear whether Prince can expect to find another job at the top of Corporate America.
But he’s not likely to suffer. A Wall Street Journal article reported that the disgraced executive was walking away with benefits worth $29.5 million. These include “deferred stock valued at $16.05 million, restricted stock awards valued at $10.72 million, retirement savings valued at $1.43 million and in-the-money options valued at $1.28 million, according to his separation agreement, a copy of which was filed with the Securities and Exchange Commission,” the Journal reported.
“In addition, Citigroup will provide Mr. Prince an office, an administrative assistant and a car and driver for at least five years, or until he finds a new employer. It will also pay certain taxes associated with those benefits, according to the SEC filing.”
The numbers didn’t include Prince’s multimillion-dollar bonus for 2007–prorated, of course, since he left the job a few weeks before year’s end.
Prince wasn’t the only Wall Street boss to walk the plank over the mortgage mess. Stan O’Neal was forced out as CEO of Merrill Lynch for presiding over billions in losses as a result of the housing crash.
But O’Neal’s walk-away money makes Prince look poor: $165.5 million in various types of stock grants and retirement funds. And that’s not all. The Journal noted, “Mr. O’Neal is also expected to receive a portion of his salary for the year”–although a Merrill spokesperson wouldn’t say how much. “Last year [2006], Mr. O’Neal earned $700,000 in base pay and $18.5 million in a cash bonus.”
Not bad for a guy who presided over an $8.4 billion in write-off of bad loans and a $2.2 billion loss in the third quarter of 2007 alone.
But even O’Neal’s payoff can’t match the golden parachute for James Cayne, recently ousted as CEO of the investment bank Bear Stearns.
Last July, when Bear Stearns became the first Wall Street firm hit by the credit crisis after two of its hedge funds collapsed, Cayne “was playing in a bridge tournament in Nashville, Tenn., without a cell phone or an e-mail device,” the Journal reported.
“As Bear’s fund meltdown was helping spark this year’s mortgage-market and credit convulsions, Mr. Cayne at times missed key events. At a tense August conference call with investors, he left after a few opening words, and listeners didn’t know when he returned. In summer weeks, he typically left the office on Thursday afternoon and spent Friday at his New Jersey golf club, out of touch for stretches, according to associates and golf records. In the critical month of July, he spent 10 of the 21 workdays out of the office, either at the bridge event or golfing, according to golf, bridge and hotel records.”
Cayne survived the scandal for a time, making a scapegoat of Bear Stearns co-president Warren Spector, who was forced out in August. Spector didn’t get a severance package, but he did pocket $23 million in “capital accumulation package awards.”
Then, in early January, the 73-year-old Cayne was forced out, too. But he remains the owner of 4.9 percent of Bear Stearns stock, worth an estimated $1.3 billion.
At the other end of the economic scale, workers who were bypassed by the boom are bracing for recession.
Economists of every political stripe are predicting a slump, the Democratic presidential candidates have all made proposals for an economic stimulus package — and even the Bush White House, long in denial about the housing crisis and its impact, is trying to put together a plan to jump-start the economy. Yet the stimulus proposals from both parties amount to just a fraction of the amount spent on the U.S. wars in Iraq and Afghanistan.
With more bad news emerging on practically every economic front–falling house prices, a credit squeeze, declining consumer spending, stagnant wages and higher inflation — the picture is likely to get worse.
But Wall Street has already signaled Corporate America’s plan: Grab all the cash you can, and make workers pay.