Tuesday, April 7, 2009

US unemployment hits 8.5% after 5 million jobs are lost in recession

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US unemployment hits 8.5% after 5 million jobs are lost in recession

By Stephen Foley in New York

Saturday, 4 April 2009

US employers have cut more than five million jobs since the start of the recession, passing a grim milestone and sending the unemployment rate to 8.5 per cent.

And there was bad news even for people in work, since the monthly jobs data showed that employers have been cutting the number of hours available, further adding to the pressure on household budgets.

The headline figure of 663,000 job losses in March came in bang in line with forecasts, but the details of the Labour department report gave pause to those who are predicting a swift end to a deep recession that began in December 2007.

The unemployment rate is now the highest since 1983. The Labour department revised earlier months' figures downward, reflecting new information, and January now stands as the worst month for job cuts since October 1949. In total, 5.1 million positions have been axed since the start of the recession.

With companies cutting back in response to depressed demand conditions, the length of the working week fell to 33.2 hours in March, the lowest on record. A measure of underemployed people, which includes those working part-time for economic reasons and those who have given up looking for work, hit a record 15.6 per cent. "The report does not contradict the growing notion that the economy is finding a bottom. Employment will not turn on a dime and certainly there's no sign of strength, but at least it's not getting worse and worse and worse," Pierre Ellis, the senior economist at Decision Economics in New York, said.

Christina Romer, the head of the White House council of economic advisers, said the data was "unquestionably horrible" and jobs growth will not restart until after the economy begins growing again, which she expects at the end of the year. "There is a natural lag between the policies that we take and when they can actually affect the economy," she said.

According to a separate report, business activity in the US services sector shrank for a sixth straight month in March, as cash-strapped consumers cut back on purchases and the employment outlook deteriorated further. The Institute for Supply Management said its non-manufacturing index dropped to 40.8 last month from 41.6 in February

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