Just how badly is the US economy doing? This should give you an idea:
Forty thousand truck drivers and other unionised workers at a Fortune 500 transportation company called YRC Worldwide have voted to accept a 10 per cent wage cut.
The employees — members of the International Brotherhood of Teamsters, one of the largest unions in America — hope that such concessions will help save the company (in which they will get a stake). They also hope their jobs will be saved, although there are no guarantees.
They do not want to join the ranks of the 5,24,000 people who lost their jobs in December.
“While we never want to see wage reductions, this vote shows that our members understand that we are facing the worst economy since the 1930s and that the company needs some help to get through this difficult period,” Tyson Johnson, director of the Teamsters’freight division, was quoted as saying by the Houston Chronicle.
According to Labour Department figures, last month’s loss pushed the total for 2008 to nearly 2.6 million, the biggest drop since 1945. The number of Americans out of work and searching rose to 11 million for an unemployment rate of 7.2 per cent, a 16-year high.
Even that figure understates the problem. If those who wanted full-time work but found only part-time jobs and those too discouraged to look are included, the unemployment rate rose to 13.5 per cent.
Credit has dried up, and sales are down. In December auto sales fell 36 per cent from year-ago levels. Despite big discounts, the holiday-shopping season was the worst in 40 years. Worried employers are slashing payrolls.
Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the US International Trade Commission believes things will get worse for at least four more months, probably six.
Job losses will rise to 4 million.
“We’re in for one heck of a ride. The fury of the recession will be like nothing any living person has seen,” he says. “Pay cuts are a sign of deflation, which is the worst indication. It’s like falling blood pressure in a human being.”
A large stimulus package will only give the economy a temporary boost, Morici says.
For a long-term solution, Asian countries like China and India will have to give up mercantilist and protectionist policies and the United States will have to straighten out its banks, he says.