The U.S. unemployment rate jumped in February to 8.1 percent, the highest level in more than a quarter century, a surge likely to send more Americans into bankruptcy and force further cutbacks in consumer spending.
Employers eliminated 651,000 jobs, the third straight month that losses surpassed 600,000 -- the first time that’s happened since the data began in 1939, Labor Department figures showed today in Washington.
Today’s report indicates the economy is in worse shape than previously estimated and may need additional federal measures to help stop what may become the worst recession in the postwar era. The jobless rate has now already reached the level the Obama administration projected as an average for the whole year.
“The overall economy is going to be in this recession a little longer than expected,” John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina, said in a Bloomberg Television interview.
Treasuries fell, sending 10-year note yields up to 2.84 percent at 10:11 a.m. in New York from 2.81 percent late yesterday, on concern debt sales will climb as officials spend more to fight the crisis. The Standard & Poor’s 500 Stock Index rose 0.5 percent to 686.02 amid some investor relief the drop in payrolls didn’t exceed the range of economists’ forecasts.
While President Barack Obama’s $787 billion stimulus plan aims at creating or saving 3.5 million jobs, today’s report showed the U.S. has now already lost 4.4 million since December 2007, with more declines coming. Tumbling global demand is prompting companies from General Motors Corp. to Sears Holdings Corp. to step up firings.
“The magnitude of these losses indicates that additional measures will likely be needed,” Representative Carolyn Maloney, chairman of the congressional Joint Economic Committee, said in a statement after the release. “As unemployment continues to rise, our foreclosure crisis will only grow worse.”
More than 103,000 individuals and companies filed for bankruptcy in February, a private report showed this week. The destruction of U.S. household wealth left about 8.3 million Americans owing more on their mortgages in the fourth quarter than their properties were worth, other figures showed.
Payroll revisions for January and December lopped off an additional 161,000 positions. The drop in January was revised to 655,000, and December’s to 681,000, the biggest decrease since October 1949.
Payrolls were forecast to drop by 650,000, according to the median of 80 economists surveyed by Bloomberg News. The jobless rate was projected to jump to 7.9 percent. Forecasts ranged from 7.8 percent to 8.1 percent.
Today’s report showed factory payrolls fell by 168,000 after declining 257,000 in the prior month. Economists forecast a drop of 200,000. The decrease included 25,300 jobs in producers of machinery and 27,500 in makers of fabricated metal products.
Automakers, at the heart of the manufacturing slump, continued to slash jobs and trim costs to stay in business. General Motors last month said it would cut 47,000 more positions globally while Chrysler LLC announced 3,000 more layoffs.
Auto-parts makers are also suffering. Canton, Ohio-based Timken Co., the supplier of bearings to the world’s top five carmakers, said March 2 it would eliminate as many as 400 salaried jobs this year.
Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 375,000 workers after cutting 276,000. Financial firms cut 44,000 positions after a 52,000 decline the prior month. Retail payrolls decreased by 39,500 after a 38,500 drop.
Sears last week said it would shutter 24 stores, on top of eight closings announced earlier, after its fourth-quarter profit fell 55 percent due to weak holiday sales.
“This past year was a very difficult year for the world economies and for retail in the United States, and 2009 needs to be the year of restoring confidence and trust in our financial system,” Sears Chairman Edward Lampert said in a letter to shareholders.
Payrolls at builders fell by 104,000 after decreasing by 118,000, as home sales and prices continued to tumble.
Government payrolls increased by 9,000 after a gain of 31,000 the prior month, one of the few areas still hiring. Another 26,000 jobs were added by education and health providers.
Employers are holding the line on hours. The average work week held at 33.3 hours in February. Average weekly hours worked by factory workers dropped to 39.6 hours from 39.8 hours, while overtime also decreased to 2.6 hours from 2.8 hours. That brought the average weekly earnings up by $1 to $615.05.
Workers’ average hourly wages rose 3 cents, or 0.2 percent, to $18.47 from $18.44 the prior month. Hourly earnings were 3.6 percent higher than February 2008. Economists surveyed by Bloomberg had forecast a 0.2 percent increase from January and a 3.8 percent gain for the 12-month period.
Slumping sales have caused recent Chapter 11 filings by retailers such as Everything But Water LLC, the largest U.S. retailer of women’s swimwear, and Ritz Camera Centers Inc., the largest chain of camera stores.
Economists polled by Bloomberg last month forecast consumer spending will contract through the first six months of this year after sliding in the last half of 2008. Purchases have not contracted for four consecutive quarters since records began in 1947.
If the recession persists through the first half of this year, it would the longest since the Great Depression. The economy shrank at a 6.2 percent pace in the fourth quarter of 2008, the weakest performance since 1982.