Job losses clearly becoming #1 economic issue

Worrying about the credit crunch and falling home prices? That's just so...2008. For 2009 we've got a new worry: a job market in free-fall. And since home prices and sales can't firm up until people have the income to support mortgages, it doesn't matter how low rates go. From a CNNMoney.com story:

Economists believe the recession is likely to get worse until the spiraling job losses and unemployment rate start to improve.

Record low mortgage rates won't lead to higher home values and increased home sales as long as 500,000 people a month are losing their jobs.

Rising unemployment will probably make banks even less willing to lend and also lead to increased defaults on a large range of existing loans.

And with more consumers losing, or worried about losing, their jobs, that should lead to a further pullback in spending. In turn, that will make it tougher for companies to increase their profits, which could lead to even more stock market losses.

If all that weren't bad enough, economists worry that that this will put more pressure on employers to lay off even more workers -- prompting the proverbial vicious circle that can make it so hard to get out of a bad economic downturn...

Even the people who have jobs are suffering. According to a recent survey by the Society for Human Resource Management, more companies are reporting that they are cutting pay of their employees in response to the difficult environment.

In addition, the average work week has been falling steadily during the past four months. A record 8 million workers that want full-time employment have only been able to get part-time jobs, according to the government's December labor report. That's up 37% from the total of so-called underemployed workers in August.

Pay hikes will be at best modest this year for many employees lucky enough to get increases. A survey by consultant Hewitt Associates found raises will be less than 3% for the first time in the study's 32-year history.

State and local governments are also making tough choices because of the recession, with many reporting big cutbacks in services and suggesting new taxes that could further hurt cash-strapped consumers...

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