The U.S. economy continues to hemorrhage jobs at
monthly rates not seen in six decades, a government report showed, signaling
that there's still no end in sight to the severe recession that has already
cost the U.S. over four million jobs.
The report suggests that households, already seeing the value of their homes
and investments plunge, face added headwinds from the labor market, which could
put more pressure on consumer spending in coming months.
Nonfarm payrolls, which are calculated by a survey of companies, fell 651,000
in February, the U.S. Labor Department said Friday, 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 for 27 weeks or more, up from just 1.3 million at the
start of the recession.
"The sharp and widespread contraction in the labor market continued in
February," said Keith Hall, Commissioner of the Bureau of Labor Statistics.
Layoffs announcements continued last month across industries including Macy's
Inc. (M), Time Warner Cable Inc. (TWC), Estee Lauder Cos. (EL), Goodyear Tire &
Rubber Co. (GT) and General Motors Corp. (GM).
The unemployment rate, which is calculated using a survey of households,
jumped 0.5 percentage point to 8.1%, the highest since December 1983 and
slightly above expectations for an 8% rate. Some economists think it could hit
10% by the end of next year.
By some broader measures, labor-market conditions are already there. When
marginally attached and involuntary part-time workers are included, the rate of
unemployed or underemployed workers actually reached 14.8% last month, up
almost six percentage points from a year earlier.
Average hourly earnings increased a modest $0.03, or 0.2%, to $18.47. That
was up 3.6% 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."
That, in turn, could weigh further on consumer spending.
Friday's numbers suggest that the economy hasn't stabilized in the wake of
the fourth quarter's 6.2% slide in gross domestic product, which was the
steepest since 1982. Economists expect a decline of similar or even greater
magnitude this quarter.
"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 labor 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 labor 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.
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 labor 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.
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