Unemployment rate surged to 8.1%

March 7, 2009
651,000 Jobs Reported Lost in February
By JACK HEALY

Another 651,000 jobs were lost in February, adding to the millions of people who have been thrown out of work as the economic downturn deepens.

In a stark measure of the recession’s toll, the Bureau of Labor Statistics reported on Friday that the national unemployment rate surged to 8.1 percent last month, its highest in 25 years. The economy has now shed more than 4.4 million jobs since the recession started in December 2007.

And economists expect that unemployment will continue to rise for the rest of the year and into early 2010, with the unemployment rate reaching 9 to 10 percent by the time a recovery begins. But even then, with so many job losses centered in manufacturing, economists say that many positions devoured during this recession will not be coming back.

“This is not people being on furlough for six weeks or a month or two — this is permanent job losses, and that is what makes this so difficult,” said John Silvia, chief economist at Wachovia. “That is very telling in terms of how we’re really restructuring the overall economy.”

Although the tally of February’s losses was grim, the 651,000 jobs lost last month were actually fewer than the number in each of the past two months, according to revisions reported Friday. Some 655,000 jobs were lost in January, when the unemployment rate rose to 7.6 percent. December’s decline was revised to 681,000, from 577,000.

On Wall Street, financial markets seemed to seize on the fact that monthly job losses had not increased in February, and stocks rose in early trading, a day after plunging more than 4 percent. The Dow Jones industrial average was up about 150 points in the first half-hour and the Standard & Poor’s 500-stock index was 2.4 percent higher, but both were still hovering near their lowest levels since 1997.

February marked the fourth consecutive month that the economy has shed more than 500,000 jobs, a pace that underscores the magnitude of the problems facing the Obama administration as it promises to save or create 3.5 million jobs over the next two years.

Last month, President Obama signed a $787 billion stimulus package of tax cuts, infrastructure spending and emergency aid. The first tax credits, in the form of reduced payroll withholdings, are expected to appear on paychecks beginning April 1.

But in testimony this week before Congress, federal officials again cautioned that even with the stimulus spending, a recovery will take time.

The package “should provide a boost to demand and production over the next two years as well as mitigate the overall loss of employment and income,” the Federal Reserve chairman, Ben S. Bernanke, told the Senate Budget Committee, but the timing is “subject to considerable uncertainty.”

The pace of job losses has only increased since the credit crisis shook financial markets last autumn, spawning a vicious circle of economic contraction that dragged down corporate earnings, consumer spending and overall growth. And Mr. Bernanke said in testimony this week that the labor market “may have worsened further in recent weeks.”

“It just feels like we’re in the teeth of the recession, and the bite is still very hard,” said Stuart Hoffman, chief economist at PNC Financial. “This is economy-wide, industry-wide. It just shows the severity and the breadth of the job losses.”

Economists worry that mounting job losses could make it harder for homeowners to make their mortgage payments, triggering another wave of home foreclosures, which would further depress home values and the mortgage-related securities owned by major banks.

“We’re feeling the negative fallout from the intensification of the financial crisis,” Mickey Levy, chief economist at Bank of America, said. “We’re in the middle of the worst stage of job losses as well as the speed of contraction of gross domestic product.”

Workers from New York to Florida, from the Rust Belt to the Sun Belt, and across nearly every sector of the economy are being affected as employers reduce costs by slashing their payrolls and cutting their capital investment.

“There’s been no place to hide,” Mr. Hoffman said. “Everybody in every industry has lost jobs or is feeling insecure about whether they’re going to keep their jobs or how their company’s going to do.”

Retailers cut 39,500 jobs, and the construction industry cut 104,000 jobs as the housing market remained in the doldrums and home builders all but halted new-home construction.

Manufacturers alone slashed a seasonally adjusted 168,000 jobs in February, cutting payrolls in factories that produce machinery, electronics, furniture and metals.

In the New York region, the Federal Reserve’s beige book noted earlier this week, that hiring “has virtually ground to a halt since the beginning of the year, during what is usually a busy season,” with large financial firms having “all but stopped hiring.”

“Both manufacturing and non-manufacturing firms in the district report increasingly widespread cutbacks in their employment levels in February,” the report said of New York, “and a sizable proportion expect further retrenchment in the next six months.”

Mark Ortiz was one of those who joined the ranks of the unemployed in February. Mr. Ortiz lost his job at the art-framing company where he had worked for 11 years, most recently as the production manager.

“You spend all this time doing this, and now what?” he said. “It’s almost like I’ve gotten divorced and I’ve got to find a new wife.”

He has plastered his résumé across the Internet and searches for jobs every day from his home on Long Island, but his search for a good-paying job has been hampered by the fact that he went straight to work when he was younger, and never got a college degree.

“I was a guy who worked his whole life,” Mr. Ortiz said. “That was a major strike against me, a major strike.”

The jobless rate for people with a bachelor’s degree or beyond is 4.1 percent — its highest point in years, but still lower than the unemployment rate for people with less education. Of workers with only a high-school diploma, 8.3 percent were unemployed, and 12.6 percent of people who did not graduate from high school were unemployed.

Still, years of professional experience and multiple degrees, including one in law, have not sheltered people like Jeffrey Green, 53, of Placentia, Calif.

Mr. Green said he had sent out 1,000 résumés and posted his credentials on more than 100 job boards since he was laid off from his management position at a data-analysis firm in January. With no immediate prospects in sight, he is considering going to Japan to teach English, reprising his Japanese studies from his years as a college undergraduate.

“I’m just resigned,” he said. “I’m thinking, if I’m not going to make a lot of money I may as well have fun doing it.”