With defense contractors already drawing up preliminary walking papers for employees if President Obama and Congress can't cut a deal on the budget, a new report Thursday warned that failure to act will put over another 1 million out of work and raise the unemployment rate to 8.9 percent.
The National Association of Manufacturers looked at the potential of slashing $500 billion from the Pentagon's budget over 10 years and found that the aerospace, shipbuilding and electronics industry will be crushed if the so-called budget sequester takes effect.
What's more, Sen. Marco Rubio, R-Fl., today said that the impact will be felt long before the January sequester because most defense companies prepare their budget and staffing many months in advance. As a result, he said, it is likely that job cuts will start to hit in September.
Despite the warnings of a pending jobs disaster, lawmakers and the administration seem disinterested in dealing with budget and taxes until after the election. Under the Budget Control Act, automatic cuts of $1.2 trillion will go into effect in January, with about half from the Pentagon's budget, if a deal isn't cut.
"In a fragile economic recovery, policymakers need to take whatever steps necessary to prevent defense cuts that will cost more than one million jobs," said NAM President Jay Timmons.
His group's report said that in addition to job cuts, the sequestration would whack the economy, cutting GDP by 1 percent. The basics from his report are:
-- 1,010,000 private sector jobs, including 130,000 manufacturing jobs will be lost in 2014.
-- GDP will be almost 1 percent lower by 2014.
-- Total job losses will increase the unemployment rate by 0.7 percent.
-- California will experience the largest job losses in 2014 at 148,000 followed by Virginia at 115,000 and Texas with 109,000.
-- Certain industries will be hit, with aerospace losing 3.4 percent of its jobs, shipbuilding 3.3 percent, and the search and navigation industry losing 9.3 percent of their jobs.