Employers slashed 651,000 jobs from their payrolls in February and helped loft the nation's unemployment rate to 8.1 percent, a rate last seen during the bleak economy of 1983, the Labor Department reported this morning. The unemployment rate rocketed up 0.5 percentage point and sailed past economists' predictions of 7.9 percent. Also, job loss figures for December and January were revised to show an additional 161,000 jobs lost.
What does the report tell us about the job market? The Labor Department was clear about the nature of last month's job cuts, saying they were "large and widespread across nearly all major industry sectors." The biggest losses were in professional and business services, which includes everything from temp staffing to architectural services, as well as in manufacturing and construction. Jobs were also cut in the financial industry, retail, and leisure and hospitality. The healthcare industry was the bright spot, with ambulatory health care adding 16,000 jobs and hospitals adding 7,000. The government sector also registered a small increase.
Is it all bad news? Possibly not. This morning's report suggests employers may have done their most aggressive payroll cutting at the end of last year. After losing 681,000 jobs in December, the losses were smaller in January and again in February. The differences were marginal, but they could signify that the worst is behind us.
Are there any headlines I can ignore? You can, in general, ignore the headlines that compare absolute numbers with past dates. You might read that the 2.6 million jobs lost over the past four months is the biggest loss over that duration since 1975. That number looks big. Huge. But remember that the country's labor force is also big. Huge. It has roughly doubled in size since the 1960s. So keep your eye on the unemployment rate, and let the pundits scream about "Depression!" While 8.1 percent is still a tough percentage to swallow, it indicates that our job market is still comparable to the recession of the early 1980s, when unemployment reached as high as 10.8 percent. It's much less comparable with the 25 percent unemployment rate reached at the peak of the Great Depression.
What are the experts saying? "The 0.5 percentage point jump in the February unemployment rate is one of the sharpest monthly swings on record. While the drop in the household survey’s measure of employment was “only” 351,000 this month there was an unusually large rise in the labor force (as the participation rate ticked higher for the first time in several months). Some analysts may be inclined to attribute this to a more optimistic assessment of employment prospects around the time that the stimulus legislation was enacted but we believe that this is probably a stretch and that the pop in the participation rate this month is probably reflective of statistical noise." --David Greenlaw and Ted Wieseman, economists at Morgan Stanley Research
"All in all, yet another terrible job market report. Since the recession began in December 2007, the U.S. has lost 4.38 million jobs, with 75 percent of the drop occurring in the most recent six months. We expect labor market conditions to remain dreadful for many months to come, which will reinforce the decline in consumer spending that is occurring for other reasons as well." --Joshua Shapiro, chief U.S. economist at MFR
"Those looking to the details of the February employment report for relief from the hellish numbers will find little solace. From the household data, the number of those working part-time for economic reasons jumped to 8.626 million in February, compared to 4.890 million in February 2008. Of those who lost jobs in February, 50.2 percent are not on temporary layoff, the highest share on record, while those on temporary layoff accounted for only 12.0 percent of those who lost their jobs. These percentages are a sign that businesses do not expect any improvement in the outlook any time soon. The median duration of unemployment held at 19.8 weeks in February, but the mean duration did increase to 11 weeks, and 41.7 percent of the unemployed have been so for 15 weeks or more." --Richard Moody, chief economist at Mission Residential