Ray Hendon’s Economics Blog

The American economy lost almost 600,000 jobs last month and the unemployment rate rose to 7.6 percent, its highest level in more than 16 years, the Labor Department said Friday. Overall, the Labor Department reported that since the U.S. economy went into recession in December, 2007,

3.6 million jobs have been lost.  (For an update through February, see the charts below.)

Businesses in all sectors except health care are cutting back on their payrolls. It is a major retrenchment and is still getting worse. The chart above shows the change in employment levels by month. Considering that the U.S. needs, on average, about 1.5 million new jobs each month in order to keep up with labor force growth, the effects on the economy are worse than the bar chart shows. As jobs become harder to get, as they are now, this discourages many workers from even looking for work. These “discouraged workers,” as they are called, are then no longer counted in the labor force—thus understating the unemployment levels.

If the labor force participation rate was today what it was when George W. Bush took the oath of office, today’s unemployment rate would be over 9.5%.

The chart below, which tracks the unemployment rate, has been moving almost vertically since September of 2008. This is cause of great concern. This type of rapid retrenchment can lead to a spiral of self-fulfilling behavior that is exceptionally hard to stop. This is one of the reasons President Obama has spoken so forcibly on the need for speed in getting the economy righted and job creations begun.

The next chart shows the effects on unemployment among workers with various levels of education. High school dropouts are most severely affected, seeing their unemployment rising to 12%. As a worker’s educational level improves, the percentage unemployed drops. Note that those with at least a Bachelor’s degree suffered only a 4% rate of unemployment.

There isn’t much in expectations about a recovery until July, at the earliest, and even then, the recovery is expected to be slow.

This could make our current recession the longest since the 1930s, outlasting the two record-holders, the mid-1970s and early 1980s downturns. Each of these recessions lasted 16 months. The current recession, which started in December 2007, would reach that milestone in April.

Update on Unemployment: 3/6/09

The U.S. economy continued the trend of high job losses in February. The last six months have seen 3.3 million jobs disappear, sending unemployment to 8.1%, the highest level in 25 years. The surge in unemployment in February was caused by the loss of 651,000 jobs for that month, according to the U.S. Department of Labor. Last month represented a 59-year high for job losses in one month.

Jobs Lost Date:

The only good news in this set of data is that February lost no more (actually slightly less) than January, and less than December. However, this does not constitute a trend. It is too early to make that kind of call. March could go up, down or stay the same. We just don’t know where the bottom is.

Unemployment is a lagging indicator, so once the unemployment rate turns down, the economy will have already have begun improving.