The U.S. economy lost 651,000 jobs in February, the government announced Friday, as the unemployment rate soared to 8.1 percent, its highest level since 1983.

The latest grim scorecard on the U.S. workplace largely destroyed what hopes remained for an economic recovery in the first half of this year, and it added to a growing sense that all of 2009 might well be a lost cause.
Most economists now assume that the soonest the situation in the United States can improve is near the end of the year, as a $787 billion emergency spending program begins to wash through the economy, the world’s largest.
President Barack Obama called the job-loss tally “astounding,” but urged Americans to give him time to let his economic revival plans take root.
Robert Barbera, chief economist at the research and trading firm ITG, said “the current pace of decline is breathtaking. We are now falling at a near record rate in the postwar period and there has been no change in the violent downward trajectory.”
Indeed, the monthly snapshot of the national employment picture worsened an already abysmal picture as the government revised upward the number of jobs lost in December and January. The economy has now shed at least 650,000 jobs for three months straight, the worst decline in percentage terms over that length of time since 1975.
Since the recession began in December 2007, 4.4 million jobs, or 3.2 percent of the total work force, have been lost. More than half of those positions - about 2.6 million - have disappeared in the past four months alone.
The dramatic acceleration of job losses has convinced some economists that the contraction under way reflects a fundamental restructuring of the U.S. economy. In crucial industries - particularly manufacturing, financial services and retail - many companies have opted to abandon whole areas of business.
“These jobs aren’t coming back,” said John Silvia, chief economist at Wachovia in Charlotte, North Carolina. “A lot of production either isn’t going to happen at all, or it’s going to happen somewhere other than the United States. There are going to be fewer stores, fewer factories, fewer financial services operations. Firms are making strategic decisions that they don’t want to be in their businesses.”
For makers of U.S. policy, such a reality poses fundamental challenges to the traditional response to hard times. For decades, the government has reacted to economic downturns by handing out temporary unemployment-insurance checks, relying upon the resumption of economic growth to deliver needed jobs.
This time, argues Silvia, the government needs to put a much greater emphasis on retraining workers for careers in other industries.
In the auto industry, for example, annual U.S. car sales have dropped from about 17 million a few years ago to 9 million now. Even if sales increase to 10 or 12 million, that still leaves a lot of unneeded factories.
“That’s a lot of workers that are not coming back,” Silvia said. “That’s a lot of steel, a lot of rubber, a lot of suppliers that are not coming back. It’s really challenging to us as a society.”
February saw another 168,000 manufacturing jobs eliminated, bringing losses during the last year to 1.2 million. In Michigan, where the troubles of the auto industry have been particularly traumatic, the unemployment rate sits at 10.6 percent, the highest of any U.S. state.
“The people who do what I do in the Detroit area are a dime a dozen,” said Kim Allgeyer, 46, a machine toolmaker in Westland, Michigan, who was laid off in January from a company that made manufacturing assembly lines for the Big Three automakers. Since then, he has failed to find another full-time job, subsisting on day labor and one-week stints for contractors. He is thinking of moving to Louisiana or Mississippi to seek work as a shipbuilder.
“Who’s going to put me to work?” he asked. “Where’s the work at? It’s just a great big black hole.”
Much the same can said for financial services, which relinquished another 44,000 jobs in February. During the housing boom, banks hired tens of thousands of well-compensated traders, analysts and marketers to sell mortgage-backed securities and other exotic flavors of investments. That industry is unlikely to return to anything close to its former shape.
Retailers are shuttering stores as the previous era of easy money fueled by rising house prices and abundant credit gives way to a new period in which millions of households are being forced to confine their spending to their paychecks, limiting their trips to the mall. The economy lost 39,500 retail jobs in February, and has eliminated more than 500,000 over the past year.
The United States has been neglecting job training programs for decades, asserts Andrew Stettner, deputy director of the National Employment Law Project in New York. In current dollars, the country devoted the equivalent of $20 billion a year on job training in 1979, while spending only $6 billion last year.
The stimulus spending bill includes $4.5 billion in additional funds for job training. But under current programs, many of those eligible for training are given vouchers that cover only a semester or two at community colleges, while careers in growth industries like biotechnology and health care typically require two-year degree programs.
“We have to seriously look at fundamentally rebuilding the economy,” Stettner said. “You’ve got to use this moment to retrain for jobs.”
The job market still is not in as bad shape as it was in 1982, when the jobless rate peaked above 10 percent. Unemployment entering this downturn was somewhat lower than it was in 1981. But it is getting close.
“There’s been no place to hide,” said Stuart Hoffman, chief economist at PNC Financial in Pittsburgh. “Everybody in every industry has lost jobs or is feeling insecure about whether they’re going to keep their jobs or how their company’s going to do.”
The government’s broadest measure of unemployment and underemployment was 14.8 percent in February. That includes some of the people who have stopped looking for work because they do not believe they can find jobs. It also includes part-time workers who want to be working full time.
“There was a huge increase in uncertainty and a huge hit to confidence which caused a large rethinking among businesses,” said Ethan Harris, co-head of U.S. economics research. “That caused a big downshift in employment.”
Similar crises, like the stock market crash of 1987 and the near-collapse of the hedge fund Long Term Capital Management in 1998, saw dysfunction continue to grip markets for about six months, Harris said, suggesting that this episode may be nearing an end.
But history also shows that when fear lifts, the economy returns not to normalcy but to wherever it was when the crisis began, Harris said. That means that even if order is restored to the financial system, the economy will still be staring at a recession.
A return to sustainable growth, economists say, depends on how soon the Obama administration can manage to put together and execute a credible plan to remove the bad loans choking the balance sheets of financial institutions.
“The 800-pound gorilla is whether we face up to the bad loans in the financial system,” said Alan Levenson of T. Rowe Price in Baltimore.
(Source: iht.com)