Lots of bad employment news today, and we’ll start out with the lead story in The New York Times, which splashes across two columns a report that says Americans are getting fewer hours at work, setting off a chain effect of negative economic consequences.

Throughout the country, businesses grappling with declining fortunes are cutting hours for those on their payrolls. Self-employed people are suffering a drop in demand for their services, like music lessons, catering and management consulting. Growing numbers of people are settling for part-time work out of a failure to secure a full-time position.

The gradual erosion of the paycheck has become a stealth force driving the American economic downturn. Most of the attention has focused on the loss of jobs and the risk of layoffs. But the less-noticeable shrinking of hours and pay for millions of workers around the country appears to be a bigger contributor to the decline, which has already spread from housing and finance to other important areas of the economy.

The Times reports that hours worked in March fell compared to six months earlier for the first time since the 2001 recession. Average earnings declined for the sixth straight month. Combine this with the decline in overall wealth and stricter credit and things look even weaker.

The Washington Post reports on A7 that its new poll says 90 percent of Americans describe the economy negatively, the lowest rating in more than fifteen years.

Deep cuts on Wall Street

The Financial Times reports on page one that Citigroup’s CEO may cut costs by 20 percent, “deepening fears that Wall Street and the City of London are about to be hit by tens of thousands of additional job losses.”

The news comes at a time when Merrill Lynch says it will cut 4,000 jobs, about 10 percent of its total workforce, after losing $2 billion in the first quarter. The FT says so far 40,000 financial jobs have been lost. The paper says that could mean 25,000 jobs or so in the next several months. It reports that Citi alone may cut another 25,000 and that JPMorgan chase may slash more than half of the 14,000 employees it inherited from Bear Stearns.

Jobless ranks swell

The newly unemployed increased last week by 17,000, as measured by new claims for jobless benefits, which rose to a total 372,000. But the four-week average, which smoothes out some of the blips, was flat at a still elevated 376,000. The total number receiving unemployment hit the highest mark in nearly four years, according to Bloomberg.

“We’ll definitely continue to see job losses,” said Ellen Zentner, an economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “The labor market remains weak. Consumer spending is slower and will remain slow.”

John Thain, in vain, is wrong about the pain

Speaking of Merrill, its CEO went on a press tour yesterday, talking to both the WSJ and the NYT about his company’s bad quarter. The firm lost $2 billion in the first quarter and wrote down another $6.6 billion worth of assets yesterday, bringing its grand total to $30 billion so far.

The WSJ’s C1 Heard on the Street quotes “people familiar with the firm” as saying the company expects finally to be profitable again in the second half after three consecutive quarters of losses.

Coincidentally, Floyd Norris in his column today on the front of the Times’ business section, notes that so far Wall Street has been woefully wrong at predicting the end of the crisis.

Three months ago, at the World Economic Forum in Davos, Switzerland, I commented to one of the best-known men in American finance that he seemed pretty glum.

He agreed, and said that was true for virtually every financial executive there.

But he said, there was one exception. John Thain, the newly appointed chief executive of Merrill Lynch, was smiling a lot, he said, and with good reason.

He asserted that Mr. Thain knew that Merrill had taken at least $2 billion more in write-offs than were really needed, leaving him an ample cushion for any new problems that might appear.

If so—and Mr. Thain would not comment when I asked him about it—the optimism was misplaced. On Thursday, Merrill announced an additional $6.5 billion in new write-offs.

The Times in a C6 news story has an amazing comment from the man himself. It’s our Where’s Your Flack? Quote of the Day:

He said the reputation of Wall Street had not been harmed by the credit crisis as much as it was after the technology bubble burst.

“It’s not like these securities were foisted on poor investors in Iowa,” Mr. Thain said about the toxic mortgage bonds that have cost his bank so dearly. “It’s not as bad as 2001 because, for the most part, Wall Street has suffered the most.”

While there’s certainly truth to the second part of his statement—though we’ll argue that Wall Street hasn’t suffered enough for its sins—it’s simply untrue that the sins of his bank and Big Finance in general didn’t affect “poor investors in Iowa” as he implies.

Remember this in Florida? How about Norway?

Rest assured, Wall Street’s reputation is taking as big a hit as it did in the tech bust.

Libor lie, updated

The WSJ on C1 follows up on its page-one story this week about Libor possibly being manipulated. It’s got more evidence that banks were indeed lying about their interest rates—lowballing them to make it look like they’re in better financial condition than they really are.

On Wednesday, the British bank group that oversees Libor, a measure of how much banks charge to lend to each other and one that’s critical to the operations of financial markets, said it will hurry its investigation into possible manipulation. A day later, Libor had its biggest one-day spike in eight months.

The move by the BBA, which oversees Libor, came amid concerns among bankers that their rivals were not reporting the high rates they were paying for short-term loans for fear of appearing desperate for cash…

If sustained, the jump could mean higher debt payments for homeowners, companies and others. Libor serves as the basis for interest rates on trillions of dollars in floating-rate corporate loans and mortgage loans. Libor rates are also used in hundreds of trillions of dollars in derivatives contracts, such as the interest-rate swaps companies and investors use to protect themselves against sudden shifts in the relationship between short-term and long-term interest rates.

This is definitely still a story to watch.

Delusions of recovery

The Wall Street Journal on page one notices a “split” so far this earnings season between banks and consumer-focused companies and those that are more business-to-business and multinational.

With one in five of the Standard & Poor’s 500 companies having reported, overall earnings are down 22 percent. But at non-financial companies earnings are up more than 8 percent.

The WSJ says some analysts are predicting a big bounce-back in the second half, as consumers return to buying “consumer cyclicals—such as cars or home furnishings.”

But where is this money going to come from? Who’s predicting that the housing market has hit bottom? Liberal economist Dean Baker says three trillion dollars of housing wealth has evaporated so far and that that will double by the end of 2008. He’s a bear, but let’s say he’s wrong by half. That’s still $1.5 trillion wiped out in the next eight months, and that will make people feel poorer and inclined to spend less. It seems unlikely to us that non-financial companies are going to make it out of this crisis without suffering at least marginally falling profits at some point.

The Journal says companies are hoping to make it through to the third quarter or whenever the Fed’s interest rate cuts start really making an impact.

All About the Times Co.

The New York Times Company reported a $335,000 loss in the first quarter, and its performance was much worse than expected, which is saying something these days, the NYT says.

Newspaper ads in print and online plummeted nearly 11 percent and the pace of online ad growth slowed to 16 percent from 22 percent a year ago.

It looks like About.com contributed most of the quarter’s good news for the Times. Its operating profit (earnings before interest and taxes) was $12.6 million, up 10 percent. The rest of the company was negative. Total operating profit was $6.2 million.

The Journal weaves the news into a nice overview of the not-so-nice newspaper landscape.

Some bad tech news

Offsetting the good tech news of late (including Google’s 30 percent profit gain), already-struggling American Micro Devices posted a sixth straight loss and said it would slash 1,650 jobs. Bloomberg says sales were down 22 percent from a year ago, while the WSJ says sales were up 22 percent.

Let’s go to the tape… And the Journal wins. Up 22 percent.

Power of the pen

The Los Angeles Times’s health-care investigations continue to have repercussions in California. The paper reports that:

Thousands of people whose policies were canceled by California health insurers will have a chance to win back their coverage and be reimbursed for outstanding medical bills, the Schwarzenegger administration announced Thursday.

The state’s action is the boldest yet in dealing with the industry’s increasingly controversial practice of canceling individual coverage—known as rescission—after patients have taken ill and submitted medical bills.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.