Published March 7, 2009

Latest US Data

Gloom deepens as US jobless rate hits 8.1%

No light at the end of the tunnel, says economist

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(Washington)

THE US unemployment rate bolted to 8.1 per cent in February, the highest since late 1983, as cost-cutting employers slashed 651,000 jobs amid a deepening recession.

Both figures were worse than analysts expected and the Labor Department's report shows America's workers being clobbered by a wave of layoffs unlikely to ease in the coming months.

'There is no light at the end of the tunnel with these numbers,' said Nigel Gault, economist at IHS Global Insight. 'Job losses were everywhere and there's no hope for a turnaround any time soon.'

The net loss of 651,000 jobs in February came after even deeper payroll reductions in the prior two months according to revised figures released yesterday. The economy lost 681,000 jobs in December and another 655,000 in January.

Employers are shrinking their workforces and turning to other ways to slash costs - including trimming workers' hours, freezing wages or cutting pay - because the recession has eaten into their sales and profits. Customers at home and abroad are cutting back as other countries cope with their own problems.

Since the recession began in December 2007, the economy has lost 4.4 million jobs, more than half of which occurred in the past four months.

With employers showing no appetite to hire, the unemployment jumped to 8.1 per cent from 7.6 per cent in January. That was the highest since December 1983, when the jobless rate was 8.3 per cent. All told, the number of unemployed people climbed to 12.5 million. In addition, the number of people forced to work part time for 'economic reasons' rose by a sharp 787,000 to 8.6 million.

Meanwhile, the average work week in February stayed at 33.3 hours, matching the record low set in December.

Job losses were widespread last month in most sectors.The few areas spared: education and health services, as well as government, which boosted employment last month.

'There's no way that we could or should put a positive spin on these,' Christina Romer, chair of the White House Council of Economic Advisers. 'The American people are clearly suffering.'

'We will continue to do whatever is necessary to break the destructive cycle of job loss in this country and put Americans back to work,' Labor Secretary Hilda Solis, adding that her department is releasing US$3.5 billion to states to help pay for education, training and employment services.

Even in the best-case scenario that the relief efforts work and the recession ends later in 2009, the unemployment rate is expected to keep climbing, hitting 9 per cent or higher this year. In fact, the Federal Reserve thinks the unemployment rate will stay elevated into 2011. Economists say the job market may not get back to normal - meaning a 5 per cent unemployment rate - until 2013. -- AP, Reuters, Bloomberg