WASHINGTON - U.S. unemployment surged in October as companies laid off more workers than at any time in the last 21 years, the government said yesterday in a report that portrays an economy damaged by the September terror attacks and slipping into recession.
The nation's nonfarm payrolls shriveled by 415,000, the largest loss of jobs since May, 1980, when the country was entering the deepest downturn of the post-World War II era. That pushed the jobless rate up a half percentage point to 5.4 percent, its highest level in almost five years.
The report is bleaker than economists expected. Most forecasts had called for payrolls to fall by about 275,000 jobs and predicted the losses would remain largely confined to the manufacturing sector. But the losses were greater and spread across the economy.
The biggest surprise occurred in the nation's service sector, which had been a bulwark against joblessness. Service businesses shed 111,000 jobs in October, their largest one-month loss since Washington began keeping records in 1939.
Many of the losses were directly traceable to the Sept. 11 attacks, which substantially reduced the nation's appetite for travel. The airline industry laid off 42,000, according to government records, and have announced further layoffs of up to 100,000. Transportation services, which include travel agencies, cut 11,000 jobs. Hotels slashed 46,000 workers. Auto services, which includes car rental agencies, cut 13,000.
Retail employment dropped by 81,000 during a period when it usually expands in preparation for the holiday buying season. Restaurants and bars laid off 42,000.
President Bush used the numbers to lobby the Senate for quick passage of a bill designed to revive the economy. Aware that rising joblessness could galvanize support for Democratic proposals to expand unemployment compensation, the White House called a briefing on how administration-favored business tax cuts would offer a better fix.
Many economists predict that the Federal Reserve will cut its benchmark interest rate by another half-percentage point when its policymaking body meets Tuesday. Such a reduction, the 10th this year, would push the “federal funds” rate - the short-term interbank lending rate that is a benchmark for many other interest charges - to a four-decade low of 2 percent.
Government statistics issued earlier this week showed the U.S. economy contracted at a 0.4 percent annual rate in the July-through-September quarter, the first decline since 1993.
Most analysts believe it will shrink more dramatically during the October-through-December quarter. A recession is traditionally defined as two consecutive quarters of decline in the nation's gross domestic product - the value of all goods and services produced in the nation.
Most analysts had predicted that growth would snap back quickly early next year. But after the turmoil from the September attacks and the unexpectedly large October job losses, many are pushing back the start of recovery to spring or summer.
Even when recovery does occur, these analysts concede, the unemployment rate may continue to rise as companies maintain lean payrolls until they are certain that growth will continue.
“The labor market deterioration is going to turn out to be more persistent than we had thought,” said William Dudley, chief U.S. economist with Goldman Sachs.
The October job losses fell especially hard on traditionally disadvantaged groups, according to Labor Department figures. Black unemployment jumped a full percentage point from 8.7 percent in September to 9.7 percent in October. Latino joblessness rose eight-tenths of a point to 7.2 percent.
But in what some analysts took as an even more telling indicator of the extent of the economy's troubles, joblessness among married people spiked upward.
The jobless rate for married men rose 0.4 percent to 3.1 percent last month, according to department figures. The rate for married women rose comparably to 3.7 percent.