US recession job losses top four million

The US economy continues to hemorrhage jobs at monthly rates not seen in six decades, a government report showed, signalling that there's still no end in sight to the severe recession that has already cost the US more than four million jobs. The report suggests that households, already seeing the value of their homes and investments plunge, face added headwinds from the labour market, which could put more pressure on consumer spending in coming months. Non-farm payrolls, which are calculated by a survey of companies, fell 651,000 in February, the US Labour Department said, in line with economist expectations. However, December and January were revised to show much steeper declines. In the case of December, the revision was to a drop of 681,000, the most since 1949 when a huge strike affected half a million workers. However, the labor force was smaller then than it is now. The economy has shed 4.4 million jobs since the recession began in December 2007, with almost half of those losses occurring in the last three months alone. And unemployment is lasting much longer. As of last month, 2.9 million people were unemployed more than six months, up from just 1.3 million at the start of the recession. "The sharp and widespread contraction in the labour market continued in February," said Keith Hall, Commissioner of the Bureau of Labour Statistics. Layoffs announcements continued last month across industries including Macy's, Time Warner Cable, Estee Lauder, Goodyear Tire & Rubber and General Motors. The unemployment rate, which is calculated using a survey of households, jumped 0.5 percentage point to 8.1 per cent, the highest since December 1983 and slightly above expectations for an 8 per cent rate. Some economists think it could hit 10 per cent by the end of next year. For many industries including manufacturing, construction, business services and leisure, the jobless rate is already in double digits. "It is hard to see where the bottom is," said Sung Won Sohn, a professor at California State University. By some broader measures, labour-market conditions are much worse than the overall jobless rate suggests. When marginally attached and involuntary part-time workers are included, the rate of unemployed or underemployed workers actually reached 14.8 per cent last month, up almost six percentage points from a year earlier. Average hourly earnings increased a modest $US0.03, or 0.2 per cent, to $US18.47 ($28.87). That was up 3.6 per cent from one year ago, as the recession has made it harder for workers to bid up wages. According to the Fed's latest economic summary known as the beige book, "a number of reports pointed to outright reductions in hourly compensation costs". The latest employment numbers suggest that the economy hasn't stabilised in the wake of the fourth quarter's 6.2 per cent slide in gross domestic product, which was the steepest since 1982. Economists expect a decline of similar or even greater magnitude this quarter. One risk is that the stepped-up pace of layoffs may snuff out tentative signs of stabilisation in consumer spending, which accounts for about 70 per cent of GDP. Consumer spending rose in January, and retailers last month posted their first monthly rise in sales since September. "Consumers and businesses are likely to become even more cautious after a bleak report such as this, and if they stop spending, the economy cannot get going again," said Chris Rupkey, economist at Bank of Tokyo-Mitsubishi. There's little Fed policymakers can do on the monetary policy side to stem the slump, given that official rates are already near zero. But the Fed has created a number of credit programs -- financed through an expansion of its balance sheet -- aimed at spurring new lending. Officials this week unveiled a long-awaited initiative aimed at stimulating consumer lending. Ironically, some of the pressure on labour markets appears to be a byproduct of robust productivity, which is actually a big plus for the economy over the long run. But in the current environment, it seems to be making things worse for workers as nimble businesses shed labour in anticipation of falling demand, which could become a self-fulfilling prophesy. Hiring last month in goods-producing industries fell by 276,000. Within this group, manufacturing firms cut 168,000 jobs bringing the total since the recession began to 1.3 million. Construction employment was down 104,000 last month. The unemployment rate in that sector is now 21.4 per cent, almost double where it was this time last year. Service-sector employment tumbled 375,000. Business and professional services companies shed 180,000 jobs, the fourth-straight six-figure loss, and financial-sector payrolls were down 44,000. Retail trade cut almost 40,000 jobs, while leisure and hospitality businesses shed 33,000 as households curtail nonessential spending. Temporary employment, a leading indicator of future job prospects, fell by almost 80,000. The sole bright spot among private sector industries was health care, which tends to be more labour intensive and less productive than manufacturing and other services. Health care payrolls rose 26,900. The government added 9,000 jobs. The average workweek was unchanged at 33.3 hours. A separate index of aggregate weekly hours fell 0.7 point to 101.9.