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27 February 2024

Over 650,000 jobs lost as US hits 25-year jobless high

An unemployed man waits for opening time to get a meal at a charity mission in Los Angeles, California on Friday. The US economy shed 651,000 jobs in February to push the unemployment rate to 8.1 per cent, its highest level in 25 years. (AFP) 

The US economy hemorrhaged 651,000 jobs in February, pushing the unemployment rate to a 25-year high of 8.1 per cent, according to official data on Friday pointing to an ever-deepening recession.

The number of nonfarm job losses in the Labor Department report was in line with most forecasts but underscored the dire state of the economy as companies slash jobs to cope with an intensifying slump.

The department also sharply pushed up estimates for losses for the previous two months – 655,000 in January from 598,000, and 681,000 in December from 577,000. That made December's losses the worst on record since October 1949, officials said.

The unemployment rate rose from 7.6 percent in January to 8.1 in February, the highest since December 1983.

"It's ugly and always seems to be uglier than the previous month," said Robert MacIntosh, chief economist at investment firm Eaton Vance. "It's a deep and dark recession."

MacIntosh said the report suggests a long road to recovery for the battered economy.

"I think you have to go into 2010 to actually start to see growth," he said.

President Barack Obama said the "astounding" figures would cause him to redouble efforts to promote economic recovery.

"This country has never responded to a crisis by sitting on the sidelines and hoping for the best," Obama said in Columbus, Ohio.

"We have a responsibility to act, and that's what I intend to do as president."

The jobs report underscores the challenges facing Obama's administration in stabilising a teetering financial system and pulling the shrinking economy out of a downward spiral.

Based on the most recent government estimate, US gross domestic product contracted at an eye-popping 6.2-per cent pace in the fourth quarter of 2008, and some analysts say the downturn may be even worse in the first quarter of 2009.

"There is no silver lining here," said Nigel Gault, economist at IHS Global Insight. "The recession is deepening; there is no sign yet even that the rate of contraction is slowing."

Aaron Smith at Economy.com said the jobless rate could accelerate to 10 per cent, making it harder for the US to pull itself out of the slump.

"The deteriorating job picture threatens to magnify the recession by further undermining income, spending and confidence," he said.

"Although the government's aggressive policy response will help, it will take time," he said.

Yet some said there were modest signs of hope amid the gloom due to a small improvement from December and January.

"It was an awful report but it was not a death spiral report," said Cary Leahey, senior economist at Decision Economics, who said some had been bracing for losses of up to one million jobs.

"While things are terrible, we are tracking the 1981-82 recession very closely."

Leahey added that with tax cuts and various financial rescues taking hold, "I don't see why the economy can't bottom in the next three to six months."

Robert Brusca at FAO Economics said the report suggested the worst job losses are past: "The revisions have made the trend looking ahead much less bad.... The pattern of declines no longer points to a continuing deceleration."

Officials said 4.4 million jobs have been lost since the recession began in December 2007, 2.6 million of them in the past four months.

The goods-producing sector shed 276,000 jobs in February while services lost 375,000. Within the goods-producing sector, manufacturing lost 168,000 jobs.

Among the few sectors showing modest job gains were education and government.

The report showed a total 12.5 million unemployed in the United States, after a modest increase in the labor force.

The number of persons who worked part-time for economic reasons in February – sometimes referred to as involuntary part-time workers – rose by 787,000, reaching 8.6 million.

This includes people who would like to work full time but were working part time because their hours had been cut back or because they were unable to find full-time jobs.

Despite the grim jobs data, Wall Street stocks closed mixed Friday as a late-day rebound erased heavy losses.

The Dow Jones Industrial Average rose 32.50 points (0.49 per cent) to finish the week at 6,626.94, after closing Thursday at a nearly 12-year low.