WASHINGTON (Reuters) – The U.S. unemployment rate rose to a 25-year high of 8.1 percent in February as employers, buckling under the strain of a severe recession, axed 651,000 jobs, government data showed on Friday.
Adding to the gloom, a combined 161,000 more jobs were lost in January and December than previously believed, the U.S. Labor Department said in its monthly nonfarm payrolls report.
Since the recession started in December 2007, the economy has shed 4.4 million jobs, with more than half of that number lost in the last four months alone. A total of 12.5 million people were unemployed in February, the Labor Department said.
“These are all frightening numbers and connote an economy that is still failing,” said Bernard Baumohl, chief global economist at the Economic Outlook Group in Princeton New Jersey. “The economy is still months away from this recession bottoming out.”
However, there was relief among investors the drop was not as deep as some had feared, helping the Dow Jones industrial to end 32.50 points higher at 6,626.94, offsetting a sell-off of technology shares. That took some steam off the Treasuries market, with debt prices dropping.
“The ‘whisper’ numbers were calling for as low as minus 800,000. Markets will turn before the broader economy, and the economy itself will improve before we begin seeing signs of stability in employment patterns,” said Kevin Giddis, head of fixed-income trading at Morgan Keegan in Memphis, Tennessee.
February’s jobless rate was the highest since December 1983 and was a half percentage point above January’s 7.6 percent.
The increase was the biggest for any month since April 1980. January’s job cuts were revised to show a steep decline of 655,000, while December’s payroll losses were adjusted to 681,000, the deepest since October 1949.
“We’ve only had maybe 10 months where we’ve lost 500,000 jobs in the history of our series. This is four of the 10, all in a row. We’ve never had four straight months of job losses in excess of 600,000,” said Bureau of Labor Statistics Commissioner Keith Hall.
The Obama administration, which is rolling out a $787 billion stimulus package to try to break the economy’s alarming downward spiral, said February’s jobs statistics were more evidence of the depth of the recession.
U.S. President Barack Obama, speaking in Columbus, Ohio, said: “I don’t need to tell the people of this state what statistics like this mean, because so many of you have been watching jobs disappear long before this recession hit.”
The success of spending plan depends on stabilizing the fractured financial system and the collapsed housing market, which are at the center of the economic rout.
Losses in February were broad based, with only government, education and health services hiring. Economists expected the pace of job losses to continue into 2010, even with the much anticipated economic recovery is the second half of this year.
“From an employment perspective, this is already the deepest U.S. recession since 1958. We haven’t seen any decrease in the pace of job cut announcements and the economy is showing no signs of improving,” said Benjamin Reitzes, an economist at BMO Capital Markets in Toronto.
We see the unemployment rate peaking at 9.6 percent in 2010.”
The manufacturing sector shed 168,000 jobs, after 257,000 vanished in January, while the construction sector bled 104,000 jobs after losing 118,000 in January.
The service sector, grouping industries such as airlines, hotels, banks and restaurants, slashed 375,000 positions after shedding 276,000 in January.
Companies struggling with falling revenues and tight profit margins are axing jobs in huge numbers, forcing households to further scale back spending, creating a vicious cycle.
“The situation is getting worse, not better,” Mohamed El-Erian, chief executive of bond giant Pimco, told Reuters Television, adding that the data showed “even the profitable firms are shedding labor in order to position themselves for a more difficult outcome.”
More worrying, a measure of the unemployed, people working part-time for economic reasons and those who have given up looking for work, surged to 14.8 percent — the highest on records dating back to 1994 — from 13.9 percent in January.
The Labor Department also noted a sharp rise in the number of people experiencing long spells of unemployment, with 2.9 million people having been unemployed for 27 weeks or longer in February, compared to 1.3 million in January.
The length of the workweek was steady at 33.3 hours, matching a record low registered in December. The factory workweek edged lower to 39.6 hours from 39.8 in January.
Weekly overtime hours at factories slipped to 2.6 hours in February from 2.8 in January. Average hourly earnings inched up to $18.47 from $18.44.
(Additional reporting by Andrew Quinn and Melissa Bland in Washington and Daniel Burns in New York; Editing by James Dalgleish)