By Jim Wasserman and Dale Kasler
jwasserman@sacbee.com
Evidence that the recession is feeding on itself grew Friday as the U.S. Labor Department reported the worst monthly job losses in a generation, and economists warned of a resulting wave of foreclosures from homeowners now out of work.
The government said November unemployment reached its highest level in 15 years as 533,000 people lost jobs in a deepening recession. The biggest number of monthly layoffs in 34 years drove the nation's jobless rate to 6.7 percent, up two-tenths of a percent.
The numbers raised alarms in the financial sector that a foreclosure crisis originally rooted in subprime lending is widening as more creditworthy borrowers lose their jobs.
"I see a growing delinquency problem among prime mortgages, among mortgages driven by these job loss factors," said Jay Brinkmann, chief economist for the Mortgage Bankers Association.
Brinkmann predicted that growing jobless numbers are likely to fuel a fresh wave of loan delinquencies in 2009. If so, it would further aggravate a cycle in which foreclosures damage the larger economy and the damaged economy triggers more foreclosures. It was the first time the bankers association has focused so squarely on the new threat to the housing market.
The MBA said almost 10 percent of the nation's outstanding mortgages were delinquent or at some stage of the foreclosure process during July, August and September.
Brinkmann said Friday that "absent a recession" it would have been easy to predict a leveling off of U.S. foreclosure activity next year.
"We can pretty much throw that out the window now," he said in a conference call with reporters.
He said that even as subprime loan foreclosures are waning, loan defaults are rising now among "prime" borrowers with good credit and the more traditional fixed-rate or safer adjustable-rate loans.
While job losses started with lower-skilled employees who don't own homes, Brinkmann said layoffs are moving up the food chain.
Jobless rates for people with technical backgrounds climbed from 3.3 percent to 5.5 percent the past year. For the college-educated, unemployment rose from 2.2 percent to 3.1 percent, he said.
"Those are the groups most likely to be homeowners," Brinkmann said.
That phenomenon was on display Thursday in Sacramento when 2,050 struggling borrowers – four times more than expected – showed up for a foreclosure prevention workshop sponsored by the Hope Now Alliance and Gov. Arnold Schwarzenegger's Task Force on Nontraditional Loans.
Many attending said they were in trouble because they or members of their households had lost jobs or owned small businesses where revenue has fallen.
Roxene Rice of Meadow Vista said her family's loan troubles started "when disaster struck and my husband lost his job for nine months."
Margarita McWhorter traced part of her troubles to recently losing her sales job at a Sacramento jewelry store.
Friday's job report showed that jobs disappeared in practically every sector of the economy, including manufacturing, leisure and hospitality. Retailers hired half as many workers for the holiday shopping season as they did last year, according to consulting firm Challenger Gray & Christmas.
To make matters worse, the government revised the September and October data to show that an additional 199,000 jobs had disappeared.
Economist Sung Won Sohn of California State University, Channel Islands, said the layoffs will get worse.
"The economy is headed downhill and the brakes are not working," he states in a report.
Sohn said in an interview that the real U.S. jobless rate is 12.5 percent if you count people relegated to part-time jobs and those who aren't looking.
In October, unemployment reached 7.9 percent in El Dorado, Placer, Sacramento and Yolo counties – up from 5.6 percent a year ago. Statewide, the October jobless rate was 8.2 percent compared with 5.4 percent a year earlier. The state will release its November job statistics in two weeks.
The 101,000 job losses in California over the past year stress a housing market already reeling from "a combination of too many houses, speculation and weak (loan) underwriting," Brinkmann said.
Sacramento, already weakened by one of the nation's highest foreclosure rates, is especially vulnerable. The stumbling state economy has prodded Schwarzenegger to propose that state employees take off one day per month without pay.
"What I'm seeing now are state workers who are panicked … who are living paycheck to paycheck and are saying, 'Once I'm forced to take one day off a month I can't make my mortgage payment,' " said Jonathan Stein, an Elk Grove bankruptcy attorney.
Scott Anderson, a Wells Fargo & Co. economist, believes this recession, which at one year already is longer than the eight-month recessions of 1991 and 2001, will outlast the recessions of 1973-75 and 1981-82. Each lasted 16 months.
"Many people in the work force today have never experienced a recession of this magnitude and have little clue of what it means or what to do," he states in a report to clients.
Wait until after the holidays, said Sohn.
"After the shopping season I think we will see more announcements of layoffs and the bankruptcies," he said.
Some won't be working that long. According to the layoff notices filed with the California Employment Development Department, Mervyns will lay off nearly 11,000 Californians two days before Christmas, including more than 700 in greater Sacramento.
Call The Bee's Jim Wasserman, (916) 321-1102. Read his blog on real estate, Home Front, at
Educate to Liberate!
Peter S. Lopez aka: Peta
Email: peter.lopez51@yahoo.com
Sacramento, California, U.S.A.
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