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US unemployment surges as global firms hurting

Nearly 600,000 Americans lost their jobs in January, while European and Japanese firms ran into trouble, underscoring the monumental task facing governments as they look to stem the world economic crisis.

business Updated: Feb 06, 2009 23:02 IST

Nearly 600,000 Americans lost their jobs in January, while European and Japanese firms ran into trouble, underscoring the monumental task facing governments as they look to stem the world economic crisis.

January's figures brought total U.S. job losses in this recession to 3.6 million, the worst uninterrupted streak since World War Two.

Europe was also under severe strain. Britain's industrial output fell in December at its fastest quarterly rate since 1974.

German industrial production also fell sharply, by a record 4.6 percent month-on-month in December, and the German steel industry's new orders fell by the most since World War Two in the final quarter of last year.

Earlier, top Japanese bank Mitsubishi UFJ Financial Group <8306.T> booked its first-ever quarterly net loss, hit by widening bad-loan costs and losses on stock holdings. Like Toyota, it slashed its full-year forecast further.

Despite the blanket of bad news, markets were buoyed by hopes the U.S. Senate will pass an economic stimulus package.

"The economy is just falling into oblivion, and it will get worse," said Greg Salvaggio, vice president of trading at Tempus Consulting in Washington. "What this does is it puts the focus on the Senate debate. Everyone across markets is watching Washington."

The Dow Jones industrial average and the S&P 500 index were both <.DJI> <.SPX> up about 2 percent after the U.S. jobs report.

U.S. Senate Majority Leader Harry Reid said he believed the Senate would "be able to work something out" for a deal on the huge economic stimulus package sought by President Barack Obama, assuaging some concerns the measure might not make it through.

The Democratic-led Senate will try again on Friday to pass a $937 billion economic package even as lawmakers sought to broker a deal to trim proposed spending.

The focus of rescue plans was falling primarily on the United States, which was where the turmoil began, but the suffering was worldwide.

The world's biggest automaker, Toyota Motor Corp, forecast a full-year loss three times bigger than it flagged just six weeks ago as it struggles to cut output quickly enough to match evaporating global sales.

A German government source said the economy probably contracted by up to 2 percent on the quarter in the final three months of last year, and was down noticeably in the first quarter of 2009.

"Conditions in the German industrial sector are deteriorating at an alarming rate," said Carsten Brzeski at ING Financial Markets.

Bank of Japan Governor Masaaki Shirakawa said slumping exports and weak share prices were taking a heavy toll on the economy and banking system there.

"The worsening of economic activity in the past three months has been very severe," Shirakawa told a parliamentary committee.

Japan's largest brokerage, Nomura Holdings, said on Friday it would raise up to $3.3 billion to replenish a capital base depleted by soured investments and its acquisition of parts of failed U.S. investment bank Lehman Brothers.

Like its southern neighbor, Canada also suffered its worst job losses in over three decades in January as employers cut a record 129,000 workers, pushing the jobless rate to 7.2 percent.