That's the only word I can use to describe today's snapshot of the U.S. labor market. Aside from the attention-grabbing headline number of a net loss of 533,000 jobs, payrolls for the past three months have contracted by a total of nearly 1.3 million. Both readings rank as the worst since 1975 and the cumulative decline is not much less than net job losses registered during the entire 2001 recession. Comparing the recent magnitude of job losses to those observed in the mid-1970s is not without its problems since the size of today's labor market is nearly twice as large and the structural compositions are very different (manufacturing vs services). Nonetheless, one can't sugarcoat the fact that economic conditions are bad and getting worse with each new month's worth of data.

The total seize-up in credit markets following AIG's takeover and Lehman Brothers' bankruptcy back in mid-September caused the U.S. (and the rest of the world) to go from what had been a mild recession into one of the worst economic periods in decades. The de-leveraging process has spread from the financial services sector and into the economy as a whole, as businesses and households are being aggressive (forced, some might say) with the purse strings by curtailing spending and paying down debts. Federal government responses managed to prevent a system-wide collapse of the financial markets, but confidence was severely shaken and still remains fragile. Loans to the struggling Detroit Three automakers or the hundreds of billions in federal spending being planned by the incoming administration should bolster confidence; however, it remains unclear whether these additional steps will speed up the recovery process very much since the underlying structural problems are significant and need time to correct themselves.


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