THE US unemployment rate bolted to 8,1% last month, the highest level since late 1983, as cost-cutting employers slashed 651000 jobs in a deepening recession.
Both figures were worse than analysts expected, and the US labour department’s report shows America’s workers being clobbered by a wave of lay-offs 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 are everywhere, and there’s no hope for a turnaround any time soon.”
Last month’s net job loss came after even deeper payroll reductions in the previous two months, according to revised figures released on Friday. The economy lost 681000 jobs in December and another 655000 in January.
Employers are shrinking work forces, and turning to other ways to slash costs — including trimming workers’ hours and freezing or cutting pay — because the recession has eroded sales and profits. Customers at home and abroad are cutting back as other countries cope with their economic problems.
Since the recession began in December 2007, the economy has lost 4,4-million jobs, more than half of that in the past four months.
US President Barack Obama called that tally “astounding”, but urged the American people to give him time to let his economic revival plans take root.
“This recovery plan won’t turn our economy around or solve every problem,” Obama said. “All of this takes time, and it will take patience."
With employers showing no appetite to hire, unemployment jumped half a percentage point from 7,6% in January. That was the highest since December 1983, when the jobless rate was 8,3%.
The number of jobless people climbed to 12,5-million as the number of people forced to work part time for “economic reasons” rose 787000 to 8,6-million.
If part-timers, discouraged workers and others were factored in, the jobless rate would have been 14,8% last month, the highest on records dating to 1994.
The pain hit blue-collar and white-collar workers, those without high school diplomas and those highly educated. The jobless rate for people with bachelors degrees or higher jumped to 4,1% last month from 3,8% in January. That is the highest on records dating to 1992.
Meanwhile, the average work week stayed at 33,3 hours last month, matching the record low set in December. Job losses were widespread last month. Construction companies cut 104000 jobs, factories 168000 and retailers nearly 40000.
The US is the world’s most important consumer-driven economy. With job losses rising, demand for goods and services has fallen dramatically. Professional and business services got rid of 180000 jobs, with 78000 lost at temp agencies. Financial companies shed 44000 posts and leisure and hospitality firms 33000.
The few areas spared were education and health services as well as government, which boosted employment last month.
Disappearing jobs and evaporating wealth from tanking home values, retirement plans and other investments have forced consumers to retrench, driving companies to lay off workers.
This is a vicious cycle in which all the US economy’s negative problems feed on each other, worsening the downward spiral. A new wave of lay-offs hit last week.
General Dynamics said on Thursday it would lay off 1200 workers due partly to plummeting sales of business and personal jets forced it to cut production. Defence contractor Northrop Grumman and Tyco Electronics, which makes electronic components, undersea telecoms systems and wireless equipment, are also trimming payrolls. The US is getting bloodied by fallout from the housing, credit and financial crises, the worst since the 1930s, and economists say there is no easy fix.
Obama is counting on a multipronged assault to lift the US out of recession: a $787bn package of higher federal spending and tax cuts; a revamped, multibillion-dollar bail-out programme for the troubled banks; and a $75bn effort to stem home foreclosures.
Even in the best-case scenario — that the relief efforts work and recession ends this year — the unemployment rate is expected to keep climbing, hitting 9% or higher this year. The Federal Reserve thinks the jobless rate will stay high into 2011. Economists say the job market may not get back to normal — meaning a 5% unemployment rate — until 2013.
Businesses will not be inclined to ramp up hiring until they are sure any economic recovery has staying power.
The economy contracted at a staggering 6,2% in last year’s fourth quarter, the worst showing in a quarter century, and it will probably continue to shrink in the first half of this year.
Given Friday’s grim figures, Gault predicted the economy would probably shrink at least 6% in the first quarter, and that the unemployment rate would rise as high as 10% in the first half of next year.
Fed chairman Ben Bernanke told the US Congress last week that recent economic barometers “show little sign of improvement” and suggest that “labour market conditions may have worsened further in recent weeks”.
