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Renita Jablonski: GMAC Financial Services is closing all of its 200 retail offices and laying off about 5,000 employees. The lender says it’s part of a plan to reduce its mortgage lending and servicing because of the housing market downturn. Tomorrow, the Labor Department will report unemployment numbers for August. Our economic correspondent Chris Farrell is with us now. Chris, what’s the expectation for Friday’s report?
Chris Farrell: Well, the sense is we’re going to get more bad news. The unemployment rate will stay at 5.7 percent, four-year high. No big change there. But in terms of payrolls, the consensus expectation, according to a Bloomberg news survey, is that employers cut about 75,000 jobs. This will confirm the weakness in the economy.
Jablonski: And where are the job losses coming from at this point?
Farrell: Well, all the job losses have been in the blue-collar sector of the economy. Health care and education and government have been relatively immune. I’m talking relatively. But now you’re also getting a sense of, like Marvel Technology Group, they’re a maker of chips for the Blackberry, they’re saying: aaaah, it doesn’t look too good going ahead. So we might start seeing the job losses spread, into more of the high-tech sector, which has held up relatively well during this downturn.
Jablonski: So, what will this number mean for what Ben Bernanke and the rest of the Federal Reserve is thinking right now?
Farrell: I think it will increase the pressure to sort of stay the course. You know, the Fed’s been going through this very vicious discussion right now about inflation vs. the economy. And a weak employment number, boy, that’s going to make Bernanke feel a little bit stronger in his position, which is the economy’s weak; I’m not going to worry about inflation.
Jablonski: But I have heard that a 5.7 percent rate that we’re talking about right now as far as unemployment goes is still relatively low.
Farrell: It is relatively low, considering everything that has happened in this economy, you know, with the housing market, manufacturing. But I’d like to sort of twist this a little bit. Why do we think that a 5.7 unemployment rate is relatively low. That’s a lot of people out of work. And I think it really is a longer term story. It’s not just a story about whether this is a recession or a downturn, or you know the highest unemployment rate in four years. In the 1970’s, we began to accept a 4 percent, a 5 percent, a 6 percent rate of unemployment. I mean, that was just in order to keep inflation tame, that was one of the things that happened. And I think it’s absolutely outrageous that we still worry more about inflation than the Labor Market. And a 5.7 percent or 5 percent unemployment rate is unacceptable.
Jablonski: Economic correspondent Chris Farrell. Thanks so much.
Farrell: Thanks a lot.