Carl Gutierrez and Maurna Desmond
Depth of the downturn signals a return to thrift that will keep a lid on future growth.
Stingy is as stingy does. The bout of miserable U.S. employment data on Friday is a sign that suddenly penny-pinching Americans are unlikely to return to their spendthrift ways for years, an echo of the generation that came out of Great Depression.
The government reported Friday that the U.S. economy shed 651,000 nonagricultural jobs in February, bringing the national unemployment rate to 8.1%, from 7.6% in January. The government had expected employers to eliminate 650,000 jobs and an increase in the jobless rate to 8.0%. Average hourly earnings rose by 0.2%.
"It was bad across the board," said Doug Roberts, chief investment strategist at ChannelCapitalResearch.com, "but the one thing that was a bit disheartening was the level of government employment--the rate of increase was stagnant from last month. You'll also notice the same with health services too, indicating that even the so-called stronger parts of the economy seem to be weakening."
The Labor Department also revised the December payrolls figure downward, to 681,000 jobs lost, from 577,000 previously, and the January payrolls figure, to 655,000 lost, from 598,000 earlier. The total number of unemployed increased by 851,000, to 12.5 million. The number of unemployed Americans has increased by roughly 5.0 million in the past year alone, raising the unemployment rate 3.3 percentage points. Unemployment now stands at the highest since December 1983.
The length of the downturn could also significantly alter the public's psyche. "The longer and deeper the downturn is, the stronger effect it will have people's long-term psyche, and that will mean more cost-savings, both personally and for businesses," Roberts said.
The trends is already being demonstrated by rising savings (See "Income, Spending, Saving Rose In Jan.")
Steven Wieting, an economist at Citigroup, said the steep slope higher in joblessness will only be arrested if production declines fade and inventories are cleared.
"That may happen several months from now, but very sharp employment declines should persist in the near term, and represent a threat to psychology," Wieting said.
American consumers had been an engine global economic growth for much of the past two decades. For the slowdown that began with the U.S. subprime crisis -- itself an emblem of the American consumer culture -- to end, something will have to pick up the slack. A resumption of the U.S. retail buying binge seems not to be it.
On Thursday, the government released figures showing a record 31.8 million Americans received food stamps at the latest count, an increase of 700,000 in one month. Food stamps are forecast to cost at least $51.0 billion in this fiscal year ending Sept. 30, up $10.0 billion from fiscal 2008.
In a sign that new jobs are proving hard to come by, the number of long-term unemployed also has risen, by 1.6 million, in the past 12 months. Job losses were widespread across nearly all major industry sectors. The continued hemorrhaging of jobs is “symptomatic of a very, very severe recession," said Citigroup chief economist Bob DiClemente.
The contracting economy has triggered 14 months of worsening unemployment, with 10.0% of the population expected to be out looking for a job before the worst is over.
--Reuters contributed to this article.