"With all economic signs flashing recession, we expect a 0.5% rate cut from the Fed this month," said Peter Kretzmer, senior economist at Bank of America Corp. in New York.
Economists noted that the bad job news was no longer confined primarily to the construction and manufacturing sectors. September's report showed sharp job losses across the board, encompassing stores, hotels, restaurants and temporary employment.
"The job losses in retail trade, leisure and hospitality and employment services -- those are ripple effects," said Harry Holzer, a labor economist at Georgetown University and a fellow at the Urban Institute.
Holzer said he believed the unemployment rate was likely to climb in coming months. One reason is that the September data -- collected until about the third week of the month -- did not fully reflect the convulsions on Wall Street and in banking, including the Sept. 25 collapse of Washington Mutual Inc., the biggest bank failure in U.S. history.
He and other economists say the downturn could turn into the worst since 1981-82, which lasted 16 months and saw unemployment rates approach 11%. The 1990-91 and 2001 recessions each lasted eight months.
"I think there's a good chance this one will be more severe than the last two," Holzer said, "because the last two were not accompanied by the widespread financial crisis that we have now."
UCLA's Leamer explained that job losses have a cascading effect in the economy: Workers who lose their jobs curtail spending, which depresses demand, which diminishes profits, which in turn causes more job losses.
"It's very worrisome because the labor market is the amplifier" for other negative economic trends, Leamer said. "If people still have their jobs and income, they will maintain their spending patterns tenaciously. But people who lose their jobs change their behavior overnight."
Nivia Soto, a 41-year-old former garment worker, has lost two jobs in five months and is in the midst of just that sort of belt-tightening.
She has stopped shopping at Trader Joe's, instead searching for better bargains at discount stores. She downsized to basic cable TV. Weekend dinners out, shopping trips and her buying a new car every few years are now memories.
"I'm doing a lot of praying, and that's what's helping," said Soto, who was also at the Lincoln Heights job center. "You can feel people getting scared, because the hard days are coming. There's not a lot of jobs out there."
