WASHINGTON — November dealt a one-two punch to the U.S. economy, as employers shed more jobs than any month since December 1974 and mortgage delinquencies and foreclosures leapt to their highest quarterly totals since records have been kept, new reports showed Friday.
Days after the National Bureau of Economic Research reported that the U.S. economy has been in recession since last December, the Labor Department said that employers slashed non-farm payrolls by 533,000 jobs in November. The agency said that the unemployment rate ticked up to 6.7 percent, up from 6.5 percent a month earlier and the highest rate in 15 years.
Sign Up and Save
Get six months of free digital access to the Lexington Herald-Leader
The second blow came from the housing sector, as the Mortgage Bankers Association released its quarterly survey on late mortgage payments and foreclosures. The group said that 6.99 percent of mortgages are 30 days or more behind on payment, and that 2.97 percent of all mortgages are in foreclosure proceedings.
That means nearly one in every 10 outstanding mortgages is now either behind schedule on payments or actually in foreclosure. The report marked the worst quarterly showing in the 39 years that the group has kept records.
More troubling, prime mortgages given to borrowers with the strongest credit now represent a rising percentage of those mortgages that are delinquent or entering foreclosure proceedings.
The MBA's chief economist, Jay Brinkmann, in a conference call with reporters, said that fixed-rate prime mortgages make up 21 percent of the foreclosures, a big percentage considering that they make up 65 percent of all outstanding mortgages. Adjustable-rate prime mortgages account for 24 percent of foreclosures, he said, and 14 percent of all outstanding loans.
This highlights a new wrinkle in the complicated recession that's unfolding. The national housing slump was provoked by runaway lending to subprime borrowers, those with the weakest credit histories. Delinquencies and foreclosures among these borrowers appear to have flattened out, but accelerating job losses are adding a new wave of distressed mortgages held by stronger borrowers.
"I think what we're going to see is a growing delinquency problem among prime mortgages that's driven by some of these job-loss factors," Brinkmann said.
The Dow Jones Industrial Average traded down as much as 300 points following Friday's dismal news. However, the blue chips reversed course at the close of trading to finish up 259.18 points, or 3.09 percent, to 8,635.42. The S&P 500 finished up 30.85 points, or 3.65 percent, to 876.07. The Nasdaq rallied 63.75 points, or 4.41 percent, to close at 1509.31.
In a rare bit of good news for consumers, oil prices fell another $2.86 on the New York Mercantile Exchange to settle at $40.81 a barrel, more than 70 percent below July's record highs.
Investment giant Merrill Lynch said Friday that oil prices could fall temporarily to as low as $25 a barrel, which could lower gasoline prices to around $1 a gallon.
Still, job security is front and center in the American mind. The worse-than-expected 533,000 jobs lost in November was the biggest monthly jobless number since December 1974 — when employers shed 602,000 posts — and left no doubt that the U.S. recession is worsening.
The Bureau of Labor Statistics also revised upward its previous jobless reports, putting October losses at 320,000 instead of the 240,000 earlier reported, and September job losses were actually 403,000, not 284,000 as initially counted. September saw the near meltdown of global financial markets. Since then more than 1.25 million U.S. jobs have been lost.
Taken with weak holiday sales numbers, slowing exports and the worst financial crisis since the Great Depression, it's clear that the U.S. economy is in deeper trouble. That gives new urgency to efforts in Congress to forge a large economic stimulus package as soon as possible.
President-elect Barack Obama issued a statement Friday, noting that "it's likely to get worse before it gets better" and that government must move urgently with stimulus efforts.
President George W. Bush voiced concern about the economic suffering in a statement made on the South Lawn of the White House.
"It's going to take time for all the actions we have taken to have their full impact. But I am confident that the steps we're taking will help fix the problems in our economy and return it to strength. My administration is committed to ensuring that our economy succeeds. And I know the incoming administration shares the same commitment."