General Motors reported a massive third-quarter loss and says it may run out of cash next year, and Ford is planning more job cuts after burning through billions of its own.

The evidence continues to roll in that the US economy is in a recession.

Another 240,000 jobs were cut last month as the jobless rate zoomed to 6.5 per cent from 6.1 per cent in September, the US Labor Department said Friday.

Last month's rate matched the reading from March 1994.

Unemployment has now surpassed the high seen after the last recession in 2001. The jobless rate peaked at 6.3 per cent in June 2003.

Meanwhile, General Motors Corp said it lost US$2.5 billion in the third quarter and warned that it could run out of cash in 2009.

Chrysler talks suspended

The automaker also said it has suspended talks to acquire Chrysler, and that its cash burn for the quarter accelerated to US$6.9 billion due to the severe US auto sales slump.

Ford Motor Co said it lost $129 million in the third quarter, went through $7.7 billion in cash, and will cut about 2,260 more jobs in its North American salaried work force.

Still, investors seemed attracted by stock prices beaten down the past two sessions. The Dow Jones industrial average was up about 160 points in midday trading and broader market indexes also are higher.

On the crucial jobs front, the situation is likely to move from bad to worse next year. October's decline marked the 10th straight month of payroll reductions, and government revisions showed that job losses in August and September turned out to be much deeper.

Employers cut 127,000 positions in August, compared with 73,000 previously reported. A whopping 284,000 jobs were axed in September, compared with the 159,000 jobs first reported.

So far this year, a staggering 1.2 million jobs have disappeared.

Racing to assemble his new Democratic Cabinet, President-elect Barack Obama will huddle with economic advisers later on Friday. His team has been in close contact with the Bush administration to pave the way for a smooth hand-off of power.

jobless rate to climb

Many expect the jobless rate to climb to 8 per cent, possibly higher, next year. In the 1980-1982 recession, the unemployment rate rose as high as 10.8 per cent before inching down.

Stressed consumers are cutting back on their shopping and trying to trim their debt. Economists believe consumers cut back on borrowing in September, as another report to be released Friday is expected to show.

Nearly half a million Americans filed new claims for unemployment benefits in the last week alone, and skittish shoppers handed many retailers their weakest sales since 1969, government reports out Thursday showed.

The Labour Department said new filings for jobless benefits clocked in at 481,000, a dip from the previous week but a still-elevated level that suggests companies are resorting to big layoffs to cope with the economy's downturn.

companies laying off

Hartford Financial Services Group Inc, Circuit City Stores Inc, drug maker GlaxoSmithKline PLC, chip maker Advanced Micro Devices Inc, auto parts maker Dana Holding Corp, cable operators Comcast Corp and Cox Communications Inc and Fidelity Investments are among the companies that recently have announced layoffs.

To provide fresh relief, House Speaker Nancy Pelosi said Democrats, in a lame-duck session later this month, would push to enact another round of economic stimulus to provide more relief, which could include extending jobless benefits.

A US$168 billion package, including tax rebates for people and tax breaks for businesses, was rolled out earlier this year. Short of a package of US$100 billion or more, the House could press the Senate to pass a smaller US$61 billion measure that would bankroll public works projects to help generate new jobs and would extend unemployment benefits.

businesses asking for help

Companies are begging for help, too. The leaders of General Motors, Ford and Chrysler and the president of the United Auto Workers Union came to Capitol Hill to discuss billions of dollars more in financial help.

Reeling from layoffs and watching their wealth shrink as home values and nest eggs have been clobbered, shoppers turned extra frugal last month and sent sales at many retailers down sharply.

Michael P. Niemira, chief economist at the International Council of Shopping Centers, summed up the situation as "awful."

According to the ICSC-Goldman Sachs index, sales fell 1 per cent, the weakest October performance since at least 1969 when the index began.

Target Corp and Costco were among the many retailers reporting sales declines last month. Even teens stayed away from malls. American Eagle Outfitters Inc. and Abercrombie & Fitch Co reported drops in sales. But Wal-Mart Stores Inc., the world's largest retailer, logged a sales gain as shoppers hunted for bargains.

The Federal Reserve ratcheted down interest rates last week to 1 per cent and left the door open to further reductions in a bid to prevent a drawn out recession in the United States.

The country's economic state has rapidly deteriorated in just a few months.

- AP

AP

Unsold 2008 models sit under the company sign at a Toyota dealership in the southeast Denver suburb of Centennial, Colorado, November 2. Toyota Motor Corp sales dropped 23 per cent in October as low consumer confidence and tight credit combined to scare customers away from their showrooms.

AP

The GM logo hangs over an unsold 2009 Acadia sports-utility vehicle on the lot at a GMC truck dealership in the south Denver suburb of Littleton, Colorado, October 12. General Motors Corp on November 7, said it lost US$2.5 billion in the third quarter and warned that it could run out of cash in 2009. GM also said it has suspended talks to acquire Chrysler, and said its cash burn for the quarter accelerated to US$6.9 billion due to a severe US auto sales slump.

IMF urges world leaders to act boldly to stem crisis

The International Monetary Fund (IMF) has further reduced its forecast for world economic growth this year in the wake of the continuing international financial meltdown.

The Fund has also issued a plea to governments to stimulate their economies in the face of what it says is "a bigger-than-expected slowdown in the global economy triggered by recent financial turmoil".

In its latest forecast for world economic growth, the IMF sharply revised its projection downward, saying that "global activity is slowing quickly."

prospects for growth

"Prospects for global growth have deteriorated over the past month, as financial sector deleveraging has continued and producer and consumer confidence have fallen," the IMF said in its updated World Economic Outlook published yesterday.

The IMF said world output is projected to expand by 2.2 per cent in 2009.

This is three-quarters of a point below its projection which was released in October.

Even more worrying for countries such as Jamaica, the IMF has projected that advanced economies such as our main trading partner, the United States, will contract next year.

"The US economy is expected to suffer, as households respond to depreciating real and financial assets and tightening financial conditions" the Fund projected.

But the IMF noted that these projections were based on the policies already announced and advocated further action to sustain demand.

"Global action to support financial markets and provide further fiscal stimulus and monetary easing can help limit the decline in world growth," it said.

act swiftly

The agency also urged govern-ments to act more boldly, forecasting that a stronger macroeconomic policy response to the crisis could help limit the damage.

"There is a clear need for additional macroeconomic policy stimulus relative to what has been announced thus far, to support growth and provide a context to restore health to financial sectors," it stated.

"Room to ease monetary policy should be exploited, especially now that inflation concerns have moderated."

The IMF projection was released two days before finance ministers meet in Sao Paulo, Brazil.

That meeting precedes a summit of world leaders in Washington on November 15 to discuss issues related to the financial crisis.

arthur.hall@gleanerjm.com