Unemployment jumps to 6.5%, job loss worse than expected

WASHINGTON -- The nation's unemployment rate surged to 6.5% in October, highest in more than 14 years, as employers cut jobs at a swift pace, the Labor Department said Friday in a report that points to rapid deterioration in the world's largest economy.

The unemployment rate was up from 6.1% in September and surpassed the peak rate of 6.3% after the 2001 recession, suggesting this downturn will be worse.

For the first time in more than 16 years, more than 10 million people in the USA who were actively seeking a job in October did not have one, up 38% from a year earlier.

Employers slashed a seasonally adjusted 240,000 jobs last month after cutting a massive 284,000 in September and 127,000 in August.

The September and August numbers were revised to show much deeper declines than previously reported. Labor originally estimated that 73,000 jobs were lost in August and 159,000 in September.

Firms cut a staggering 1.2 million workers in the first 10 months of 2008, with more than half the decline coming in the past three months, the government said.

"In short, horrible in every way," Ian Shepherdson, chief U.S. economist at High Frequency Economics said in a note to clients. He expects the jobless rate to top 7% early in 2009.

Those who were unemployed were out of work an average of 19.7 weeks in October, the most in nearly four years.

Employers cut workers in a broad range of industries in October. Among the largest:

• Construction companies cut 49,000 workers.

• Manufacturers cut 90,000, in the 28th consecutive month of declines in the industry and the biggest drop since July 2003. The number was partly skewed by a strike at aircraft manufacturer Boeing.

• Retailers cut 38,100 workers, an ominous sign before the holiday shopping season.

• Financial services firms cut 24,000 workers.

On a positive note, local governments added 21,000 workers in October.

Average hourly earnings for non-supervisory workers rose 4 cents in October to $18.21.

The data are the latest just this week to suggest the economy is in a recession that could be far worse than the short and shallow downturn of 2001.

Data this week showed contractions in the manufacturing and services sector, declining retail sales and a continued deterioration in construction.

And the downturn is not limited to the USA. The Organization for Economic Cooperation and Development said Friday that its index of leading indicators for the world's seven major economies dropped in September, pointing to "a continued weakening outlook for all the major seven economies, with cyclical slowdowns at levels not seen since the beginning of the decade."

Included in the seven are the United States, Canada, France, Japan, Germany, Italy and the United Kingdom.

Slowing was also seen in China, India and Russia, the OECD said.