Rich Miller and Shobhana Chandra
Saturday, Oct 4, 2008
The U.S. may be heading for its worst recession in at least a quarter century as the credit crisis forces employers across the country to cut workers and ratchet back spending.
Labor Department figures showed yesterday that payrolls fell by 159,000 in September, the biggest reduction in five years. While the unemployment rate held at 6.1 percent, that’s up from 5 percent as recently as April. Some economists, including Goldman Sachs Group Inc.’s Jan Hatzius, said it rise as high as 8 percent as the credit crunch hammers consumers and companies.
“We’re in this self-reinforcing negative cycle,” said Mark Zandi, chief economist at the West Chester, Pennsylvania-based Moody’s Economy.com. “It’s going to be a very significant recession.”
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That’s bad news for Republican presidential candidate John McCain as the campaign enters its final month. The jobless rate has only risen twice in the year leading up to elections since World War II and in each case the party in power lost.
“Voters praise or blame the incumbent party in the White House for the economy,” said Ray Fair, a professor at Yale University in New Haven, Connecticut. “Rising unemployment is a negative for McCain.”
A computer model Fair has developed to forecast the election based on the economy shows the 72-year-old Arizona senator losing to his Democratic rival, Senator Barack Obama, 47, on Nov. 4.