The jump is the biggest one-month gain in unemployment the country has seen in over 21 years.
Some 415,000 jobs were cut in October, representing the largest payroll cut since May 1980. Factories, airlines, hotels, travel agencies and retailers posted some of the biggest losses.
Economic analysts had been more optimistic when forecasting October’s economic status. They had predicted a 5.1 percent unemployment rate and a loss of 280,000 jobs.
“It’s not good news for America,” President Bush said. The Sept. 11 terrorist attacks not only took thousands of lives, he said, but also “threatened the livelihoods of thousands of American workers.”
The dramatic increase in unemployment is evidence of how the terrorist attacks may have tipped the already-flagging economy into a recession.
A recession can often be identified by two consecutive quarters of declining economic output. The economy shrank at a rate of 0.4 percent in the July-September quarter, and is expected to shrink even more during the October-December quarter.
As in previous months, the manufacturing industry continued to suffer the greatest job losses. In October alone, 142,000 jobs were cut, bringing the total manufacturing job losses since March to 800,000.
The service sector cut 111,000 jobs in October, with greatest losses felt at hotels and temporary help firms. Employment in the airline industry fell by 42,000.
American factories also suffered a significant financial blow, with orders declining by 5.8 percent in October, particularly in factories producing transportation equipment, industrial machinery and computers.
That decline in orders reflects an ominous report earlier this week that consumer confidence had plunged to a 7 1/2 year low, and that consumer spending was at its lowest in nearly 15 years.
Stimulating the Economy
President Bush is urging the Senate to quickly pass an economic revival package that includes new tax cuts and increased government spending. The House has already passed a $100 billion package, but President Bush says he an Treasury Secretary Paul O’Neill will work with Senate members to come up with a final product.
“We need to work together to prevent further loss of jobs by passing an economic stimulus package that, in fact, will cause the job base to firm up and expand,” President Bush told reporters.
Senate Majority Leader Tom Daschle (D-S.D.) agreed that a stimulus package is crucial, but wants the final plan to focus less on tax cuts and more on greater aid for the unemployed, including health insurance, and more spending for homeland security.
“We’re going to move as expeditiously as we can,” Daschle said Thursday, “but I think we’ve got to do the right thing.”
The Senate Finance Committee intends to begin considering a $70 billion plan on Tuesday, Daschle said. That plan, authored by Sen. Max Baucus (D-Mont.), would be divided evenly between tax cuts and assistance for the unemployed.
On the Senate floor, Sen. Charles Grassley (R-Iowa) accused Daschle of unfairly delaying passage of the House stimulus plan.
“Democrats have turned up the partisan heat and are trying to torch any real plan that will help our economy and our country,” Grassley said.
Economists hope that a government stimulus package, combined with still more Federal Reserve interest rate cuts, will help the economy rebound next year.
The Federal Reserve has cut interest rates nine times so far this year to curb the downturn in the economy. Evidence of a possible recession has loomed for months: there were 213,000 jobs cuts in September and 54,000 in August.