Unemployment spikes to 8.1 percent

Graph showing the labor picture in February. From The New York Times.

The job losses continue. From the New York Times:

Another 651,000 jobs disappeared from the American economy in February, the government reported Friday, as the unemployment rate soared to 8.1 percent — its highest level since 1983.

The latest grim scorecard of contraction in the American work place largely destroyed what hopes remained for an economic recovery in the first half of this year, and it added to a growing sense that 2009 is likely a lost cause.

Most economists now assume that the soonest American fortunes can improve is near the end of the year, as the Obama administration’s $787 billion emergency spending program begins to wash through the economy.

Monthly unemployment rate. From MSNBC News.


“The current pace of decline is breathtaking,” said Robert Barbera, chief economist at the research and trading firm ITG. “We are now falling at a near record rate in the postwar period and there’s been no change in the violent downward trajectory.”

Indeed, the monthly snapshot of the national employment picture worsened an already abysmal picture as the government revised upward the number of jobs lost in December and January. The economy has now shed at least 650,000 jobs for three consecutive months, the worst decline in percentage terms over that length of time since 1975.

Since the recession began, the economy has eliminated roughly 4.4 million jobs with more than half of those positions — some 2.6 million — disappearing in the last four months.

The dramatic acceleration has convinced some economists that, far from an ordinary downturn whose ending will see jobs return, the contraction under way reflects a fundamental restructuring of the American economy. In crucial industries — particularly manufacturing, financial services and retail — many companies have opted to abandon whole areas of business.

“These jobs aren’t coming back,” said John E. Silvia, chief economist at Wachovia in Charlotte. “A lot of production either isn’t going to happen at all, or it’s going to happen somewhere other than the United States. There are going to be fewer stores, fewer factories, fewer financial services operations. Firms are making strategic decisions that they don’t want to be in their businesses.”

These jobs aren't coming back! That is scary, when you consider that 4.4 million jobs have been lost since the recession began, with over half of the jobs lost in the last four months. And each of those jobs represents an American consumer, who is cutting back on their spending of goods. Is it no wonder that retailers have been seeing big declines in their sales numbers (Except for Wal-Mart), or that retail profits are plummeting? American consumers do not have money to spend on goods, or have been laid off from their jobs, or are worried that their jobs are in jeopardy. So consumers are cutting back on spending, forcing firms to cut back on production, laying off workers, sending even more consumers to cut back on even more spending. The cycle just keeps repeating itself. Toss in a couple monkey wrenches on subprime mortgages sinking underwater, and declining retirement funds, and the mess just gets even worst.

Consider this interesting detail from MSNBC News:

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. That's people who would like to work full time but whose hours were cut back or were unable to find full-time work.

We have 12.5 million unemployed Americans with another 8.6 million working part time for "economic reasons." In other words, these 8.6 million would like to work full time, but are unable to find such work. And I would imagine that the 12.5 million unemployed do not count the number of individuals who have stopped looking for work, or have been dropped by the unemployment rolls.

I don't know what else to say, except that it will probably take more than a year--perhaps two years--to at least stabilize the unemployment picture. There is so many problems that this country faces, with the recession, the financial meltdown, the housing crash, spiraling health care costs, and such. Each problem has an interconnection with the other problems--banks are suffering huge losses due to their gambling with the subprime mortgage investments. Employers are facing increased health care costs in insuring their workers. Americans are cutting back on spending due to increasing interest payments on subprime home mortgages. It is breathtaking in size and scope. The unemployment picture is simply a reflection of how serious these problems are wreaking the U.S. economy. Until these deeper problems are addressed, I do not think you are going to see an improvement in the unemployment picture.