September Marks Ninth Consecutive Month of Job Losses.  The Bureau of Labor Statistics reported that 159,000 jobs were lost in September -- the largest single month drop in five years. Private employers have shed nearly a million jobs so far in 2008.  Job losses were widespread in September as the broader economy has begun to weaken and consumer purchases have slowed.  Manufacturing lost 51,000 jobs last month and the motor vehicles and parts industry alone lost 18,200 jobs.  Construction continues to shed workers, losing 35,000 jobs last month, while retail employment lost 40,000 jobs.

The Unemployment Rate Remains High at 6.1 Percent.  The unemployment rate stood at 6.1 percent for the second consecutive month, following a 0.4 percent increase in August.    Even more alarming, the number of long-term unemployed continues to rise.  The latest employment report shows that 1 in every 5 unemployed workers – currently, more than two million persons -- has been unemployed and searching for work for at least 26 weeks, the length of time they may receive standard unemployment benefits. (See Chart) Between July and December 2008, nearly 1.6 million unemployed workers will become eligible for the extended UI benefits recently signed into law that allow the unemployed to claim an additional 13 weeks of benefits.  Initial claims for unemployment insurance hovered just below 500,000 for the second straight week due in part to the effects of Hurricanes Gustav and Ike in Louisiana and Texas.  Nevertheless, the Department of Labor estimates that initial claims were noticeably above 400,000 absent these effects, which reflects the same level of claims filed during much of the 2001 recession.

Consumer Demand Stagnates as Income Falls in August.  The Personal Income and Outlays report from the Bureau of Economic Analysis (BEA) showed that consumer spending was flat in August, registering almost no increase before or after accounting for inflation.  Weak demand in August follows two consecutive months where real consumer spending fell.  Real disposable personal income (personal income net of taxes and inflation-adjusted) declined for the third straight month as the government all but finished its disbursement of stimulus payments to individuals.  The BEA estimates that real per capita disposable personal income is now lower than it has been for all of 2008 and most of 2007, indicating that consumers’ purchasing power has been significantly eroded during the course of the housing and financial crises. Since consumer spending accounts for over 70 percent of GDP, this data indicates that GDP growth may turn negative in the third quarter.