Economy lost 240k jobs in October and unemployment jumped to 6.5%

But the bigger news is the huge revisions to prior data. They added -125 k job losses to September (most of the revision for September was focused on additional job losses in the previously strong government, education, and healthcare categories), - 54 k to August. Just in September and October of this year, the US economy lost over half a million jobs. This makes the cumulative job loss this year at over 1.3 million, much higher than originally thought. The September loss at -284k is the largest monthly decline since the -325k loss in October 2001, following the terrorist attacks.

The unemployment rate leaped from 6.1% in September to 6.5% in October, the highest levels since 1994. Aggregate hours worked continued to slide for at least the sixth straight month, falling -0.3% MoM, and at a -2.6% three month annualized pace, as demand for labor dissipates. This figure is a combination of total employment and average hours worked, so it is an important indicator of true labor demand. The declines suggest continued further derosion in GDP growth.

As has been the case consistently this year (except for September), private sector jobs fell more than the total, declining by -263k in October, while the government grew jobs by 23k. Manufacturing payrolls fell the most in 5 years, shedding -90 jobs in October, as the economy slowed, and the stronger dollar also reduced export demand. Goods producing job losses accelerated to -132k in October from -83k in September. Service sector jobs are no longer supporting the economy, as employment in this sector fell -108k in October, down for -201k in September, but only -13k in July. Financial services shed -24k position in October, while temporary help fell -38k. Construction job losses rose to -49k. The only sector to show growth, other than the government, was education and health, which rose +21k in October after falling by -16k in September. The closing of auto dealers caused -20k of the -38k in retail job losses last month. Trade and transportation related jobs fell -67k.

Surprisingly, hours worked held steady in October for all categories, after falling sharply in September. The average workweek is holding at the post-war low of 33.6 hours for the general workforce, with overtime steady at 3.6 hours. Despite the large drop in manufacturing jobs, manufacturing hours worked were unchanged at 40.6 hours per week. Average weekly earnings, managed to rise +0.2% MoM, and are up +2.9% YoY, a modest increase from the recent low of +2.8% YoY in September.

Today's employment data supports the view that the US has indeed entered into a recession. There was no good news in the report, which was much worse than expected when the revisions are included. Just after the employment release this morning, Goldman Sachs reduced their third quarter real GDP forecast to -3.5% and the first quarter 2009 to -2%. They are also looking for unemployment to rise to 8.5% by the end of 2009.