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Jobless rate reaches 25-year high
The economy continued its dramatic collapse last month as the unemployment rate soared to a 25-year high of 8.1 percent amid the biggest job losses seen in a generation.
A Labor Department report Friday showed businesses eliminated another 651,000 jobs in February after even bigger job cuts in the previous two months. A 681,000 mass layoff in December was the biggest in 59 years, and the pace of job losses since October has been unprecedented in modern times.
At this rate of job losses, economists say unemployment is likely to breach 10 percent within months. The steep rise in the unemployment rate since the fall - including the jump to 8.1 percent from January’s 7.6 percent - already was the fastest since the deep recessions of the mid-1970s.
“The labor market remains in free fall,” said Nigel Gault, chief U.S. economist at IHS Global Insight. Jobs were lost in virtually every corner of the economy, with huge declines from 100,000 to 200,000 in manufacturing, construction and business services.
Even the normally robust health and education sectors managed to eke out only a 26,000-job gain during the month, and once bountiful state and local government jobs rose by a trickle of 9,000.
“There is no silver lining here,” said Mr. Gault, noting that the broadest measure of underemployment - which includes people who have stopped looking for a job and people who are working part time who would rather be working full time - jumped to 14.8 percent from 13.9 percent in January.
“We are heading for total job losses of at least 7 million and an unemployment rate peaking above 10 percent,” he said.
Bernard Baumohl, chief global economist at the Economic Outlook Group, called the job news “disastrous,” especially given the enormous efforts by the Federal Reserve, the Treasury and Congress to break the economy’s free fall in recent months.
The Fed has driven interest rates to nearly zero while pumping trillions of dollars into the economy and markets, while Congress and the administration passed the largest stimulus and bank rescue packages on record - so far to no avail.
“We’re now 15 months into the recession, and it looks like the economy is caught in an economic black hole from which there appears to be no escape,” Mr. Baumohl said. “The economy is utterly lifeless” in the face of the most strenuous resuscitation efforts ever. “We are face to face with a monster that is unrecognizable and leaves us perplexed and helpless.”
The biggest hope, economists say, is that the $787 billion stimulus package will start to offset some of the job losses through the creation of jobs in government and construction industries that would benefit from the stimulus spending. Overall, economists expect the bill to help create about 2 million jobs, offsetting less than half of the 4.4 million jobs lost since the recession started in December 2007.
About the only nugget of good news in the jobs report, Mr. Baumohl said, was that average hourly earnings held up fairly well with a 3.6 percent increase in the past year. But because of cuts in hours at manufacturers, weekly earnings were up only by 2.1 percent - about half the gains seen a year ago.
“For those who are working, average weekly pay is now growing faster than inflation,” he said. Because inflation has fallen close to zero, “in fact, real earnings have actually increased for three consecutive months and this may account for the recent pick-up in consumer spending.”
But the massive loss of jobs and income for millions of workers overwhelms this modest good news, he said.
The connection between the job market and consumers is particularly critical for the economy. Consumers, with less income to spend and increasingly fearful about their jobs, have pulled back spending in a way not seen in decades in the United States.
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