Sat, March 07, 2009
Business > Economy

Surging unemployment rate points to deeper U.S. recession

2009-03-07 10:31:56 GMT2009-03-07 18:31:56 (Beijing Time)  Xinhua English

Job seekers line up to enter the job fair at the Marriott Marquis hotel in Manhattan, New York, the United States, March 5, 2009. The job website Monster.com started its series of job fairs "Keep America Working Tour 2009" in New York on Thursday with more than 3,700 job hunters converging in search of employment. The unemployment rate of New York city has soared to 7.4% according to statistics due to the financial turmoil.(Xinhua/Gu Xinrong)

WASHINGTON, March 6 (Xinhua) -- Ignoring the Obama administration's huge economic stimulus package, multibillion-dollar bailout program for the nation's troubled banks and ambitious rescue plan to stem home foreclosures, employers in the United States continued to axe jobs in February, pushing the unemployment rate up to the highest level not seen in more than 25 years.

With Americans being clobbered by waves of layoffs unlikely to ease in the coming months, it seems certain that the world's largest economy is sinking into a deeper recession.

JOBS VANISH, UNEMPLOYMENT RATE JUMPS

Government data released Friday showed that the nation's unemployment rate jumped from 7.6 percent in January to 8.1 percent, the highest level since late 1983, as employers slashed 651,000 jobs in February, the third month in a row that job losses topped 600,000.

The economy lost 681,000 jobs, the most since October 1949, in December 2008 and another 655,000 in January.

Since December 2007 when the economy entered a recession, payroll employment has declined by 4.4 million jobs, with more than half occurring in the last 4 months.

"In February, job losses were large and widespread across nearly all major industry sectors," the Labor Department said while releasing the data.

Even in the best-case scenario that the administration's relief efforts work and the recession ends later in 2009, some economists say, the nation's unemployment rate is expected to keep climbing.

They predict that the unemployment rate could hit 10 percent by year-end and peak at 11 percent or higher by the middle of 2010.

The job market may not get back to normal, meaning a 5 percent unemployment rate, until 2013, they believe.

EMPLOYERS STRUGGLING TO SURVIVE

The deepening payroll reductions and the surging unemployment rate underscore the fact that businesses are struggling to survive amid the financial crisis, the worst one since the 1930s, and the economic recession, which has been in the second year.

As a result of the recession, businesses are suffering from plunges in their sales and profits, both at home and abroad. Like their domestic customers, foreign buyers are also cutting back as other countries cope with their own economic problems.

Moreover, banks and other financial institutions, battered by the financial crisis, have become reluctant to lend, making credit harder to access.

In order to survive, businesses are shrinking their work forces and turning to other ways to slash costs, including trimmings workers' hours, freezing wages or cutting pay.

The average work week in February, for example, stayed at 33.3 hours, matching the record low set in December.

Squeezed by the financial crisis and the economic recession, business bankruptcy filings rose 54 percent last year, faster than the 30.6 percent increase in individual filings, according to the federal bankruptcy court.

While consumer bankruptcies are 96 percent of all the filings, the impact of business filings can be much greater because they usually are accompanied by job losses and with suppliers and creditors not getting full payment.

Businesses would not be inclined to ramp up hiring until they are sure any economic recovery has staying power, economists believe.

VICIOUS CIRCLE OF SOARING UNEMPLOYMENT, WEAKENING ECONOMY

Vanishing jobs, combined with shrinking nest eggs, rising home foreclosures and declining home values, have forced Americans to cut back their spending, which in turn has caused businesses to lay off workers and slash costs in other ways, feeding a vicious downward cycle for the economy.

Responding to the grim employment data, the Obama administration vowed Friday it will continue "to do whatever is necessary to break the destructive cycle of job loss in this country and put Americans back to work."

"This data does not just represent abstract statistics. Rather it illustrates the struggles of millions of Americans who do not know how they will raise their families, or pay their bills and mortgages," Labor Secretary Hilda Solis said in a statement.

President Barack Obama acknowledged the layoffs were coming at an "astounding" clip but urged Americans to allow him time for his economic revival policies 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."

RECESSION COULD BE DEEPER THAN EXPECTED

As incoming indicators provide more and more evidence that the economic situation has been deteriorating, many economists believe that the recession is deepening and could be deeper than expected.

The Federal Reserve, and the International Monetary Fund as well, has sharply revised projections for the U.S. economic outlook in 2009.

"Looking ahead, contacts from various districts rate the prospects for near-term improvement in economic conditions as poor, with a significant pickup not expected before late 2009 or early 2010," the Fed said Wednesday in its latest survey on business conditions around the nation.

This assessment is less optimistic than a few months ago, when the central bank expected the economy to begin recover in the second half of this year.

A meaningful recovery is not expected to take hold until next year, economists also predict now.

In the final quarter of 2008, the U.S. economy contracted at an annual rate of 6.2 percent, the worst showing in a quarter-century. Economists expect the economy will continue to shrink during the first six months of this year.

The jobs situation seems to be killing any hopes for an economic recovery later this year as some had hoped, they say.

Add Your Comments:

Your Name:
Your Country:
Comment:
(English Only)
 
Please read our Terms of Service. Messages that harass, abuse or threaten others; have obscene or otherwise objectionable content; have spam, commercial or advertising content or links may be removed.

SPECIAL COVERAGE

MOST VIEWED

LATEST VIDEO

PICTURE GALLERY