Surging U.S. Unemployment Rate Pressures Obama for More Action

The jump in the U.S. unemployment rate to the highest level in a quarter century last month suggests the recession is deeper than the Obama administration forecasts and additional measures may be needed to restart growth.
The jobless rate rose to 8.1 percent in February as employers reduced payrolls by 651,000, the Labor Department said yesterday in Washington. Losses have now exceeded 600,000 for three straight months, the first time that’s happened since the data began in 1939.
Unemployment has already reached the average rate the White House projected for the whole year. The administration needs to keep its focus on repairing the banking system and implementing the stimulus, rather than get diverted by other goals such as healthcare changes, said John Ryding, chief economist at RDQ Economics LLC in New York.
“They should be focused on stabilization” of financial firms “and stimulus -- and that should not only be ‘Job 1,’ that should be the only job right now,” Ryding said in an interview with Bloomberg Television. “The question is, is it recession or is it something worse than recession” the economy is facing, he said.
The Standard & Poor’s 500 Stock Index slumped 7 percent this week, bringing the drop since President Barack Obama took office on Jan. 20 to 20 percent. Benchmark 10-year Treasury yields rose to 2.88 percent yesterday from 2.81 percent the previous day amid concern the government will need to sell more debt.
Obama’s Aim
While the president’s $787 billion stimulus plan aims at creating or saving 3.5 million jobs, the U.S. has already lost 4.4 million since the recession began in December 2007, with more declines coming. Tumbling global demand is prompting companies from General Motors Corp. to Sears Holdings Corp. to step up firings.
“You may need more fiscal stimulus in 2010,” Jan Hatzius, chief U.S. economist for Goldman Sachs Group Inc., said in a Bloomberg Television interview. The impact of the package already passed will start fading by early next year, he said.
Obama said yesterday that the “astounding” job losses show “bold action and big ideas” are needed to revive the economy. “We have a responsibility to act, and that’s what I intend to do,” he told a group of Ohio police recruits aided by his stimulus package.
Revisions to January and December statistics lopped an additional 161,000 jobs from previous estimates, the Labor Department’s figures showed.
Economists’ Forecasts
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.
“We’re going to have to have a lot more jobs than 3.5 million” generated to get a “serious recovery” in the economy, Harvard University professor Robert Barro said in a Bloomberg Television interview. Barro calculated a 30 percent chance the U.S. will slide into a depression, which he characterized as at least a 10 percent drop in gross domestic product.
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 Industry
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.
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-care 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 average weekly earnings up by $1 to $615.05.
Bankruptcy Filings
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.