Transcripts

The Nation's Unemployment Rate Soars To Historic Highs

JEFF YASTINE: President-Elect Obama's comments came just hours after we learned that the nation's unemployment is now at its highest level since 1994. According to the Labor Department, the jobless rate soared to 6.5 percent in October, up from 6.1 percent in September. And American business cut 240,000 jobs last month on top of a revised loss of 284,000 positions in September. Scott Gurvey reports.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: There was little in the employment report for October to comfort those looking ahead. Conrad Dequadros of RDQ Economics says all signs point to a recession extending well into next year.

CONRAD DEQUADROS, ECONOMIST, RDQ ECONOMICS: Unfortunately, this recession looks like it is going to be deeper than the 2001 recession. I think the fourth quarter we could see GDP decline by as much as 3 percent. I think in the first quarter the decline will be fairly substantial as well.

GURVEY: The big jump in the unemployment rate puts that measure of pain at its highest level in 14 years. Dequadros expects it to get much worse.

DEQUADROS: Once the recession ends, the recovery is likely to be quite lackluster. So with the economy growing below its potential growth rate, the unemployment rate will continue to rise much like it did in 2002. We're already at 6.5 percent. I think that we'll likely be approaching 8 percent by the end of 2009.

GURVEY: There have yet to be any signs of an end to the downturn. Key indicators of demand and production are falling sharply. The employment report shows employers are now playing catch-up, shrinking payrolls to keep pace with their shrinking business. Economists point to the continuing credit crunch as the root problem. The Fed has lowered interest rates but banks are still not lending. So the Fed stepped into the breach, buying equity in financial institutions and buying commercial paper to put cash in the hands of businesses. Neal Soss of Credit Suisse says policy makers need to be even more creative.

NEAL SOSS, CHIEF ECONOMIST, CREDIT SUISSE: You can certainly imagine expanding that. If you take the view that this is an emergency of some sort, unusual and exigent circumstance to use the language of the statute, you can see the Fed doing a lot more of that. And if you make car loans people will buy cars. They may not buy as many as before but they will buy more than they did last month.

GURVEY: Some believe having the Fed loan directly to consumers is the answer. They note that Fed funds, officially pegged at 1 percent, are actually trading at a quarter of a percent and still the credit crunch continues. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.