Credit Herald

The U.S. unemployment rate soared to 8.5 percent last month, a fresh 25-year high, as employers slashed 663,000 jobs and cut workers’ hours to the lowest level on record, the government said on Friday.

In a report underscoring the economy’s distress, the Labor Department also revised its data to show job losses of 741,000 in January, the biggest decline since October 1949. February’s drop in non-farm payrolls was unrevised at 651,000.

The report, coming in the wake of recent data that have surprised on the upside, did little to alter perceptions the economy’s downward momentum was slowing, as unemployment tends to peak well after a recession ends.

The economy now in its 16th month of recession remained on track to recover in the second half of this year and the intense phase of job losses was likely over, economists said.

“I don’t think the recovery for the end of this year is derailed by this jobs report. It looks like the job losses are certainly down significantly from January, which may very well be the peak,” said Bernard Baumohl, chief global economist at the Economic Outlook Group in Princeton, New Jersey.

U.S. stocks fell on the data, but government bond prices dropped as some traders had braced for an even weaker report.

Economists had expected non-farm payrolls to fall by a slightly less severe 650,000 jobs in March, but had anticipated the jump in the jobless rate from February’s 8.1 percent.

March’s unemployment rate was the highest since November 1983, when the economy was recovering from the back-to-back recessions of 1980 and 1981.

Since the start of the current downturn in December 2007, the economy has shed 5 cheap car insurance.1 million jobs, with about two-thirds of the losses occurring in the last five months, the department said. In the first quarter of 2009, 2 million jobs were lost.

WORST OF JOB LOSSES LIKELY OVER

“What we saw today may indicate the intense portion of job declines may have reached its nadir,” said Joseph Brusuelas, an economist at Moody’s Economy.com in West Chester, Pennsylvania. “The fact that weekly jobless claims continue to increase and we have further auto cuts in front of us creates some risk.”

To combat the deep recession, which next month will become the longest downturn since the Great Depression, the government has put in place a $787 billion package of tax cuts and spending. In addition, the Federal Reserve has pumped trillions of dollars into the economy.

Christina Romer, the head of the White House Council of Economic Advisers, called the figures “unquestionably horrible.” She told Reuters Television the economy should be growing by the year’s end, but that jobs growth would lag.

“As painful as it is to say, you have to be a little bit patient, that is unfortunately where we are,” she said. “We are taking every action we can to make sure we don’t see numbers like this a few months from now.”

Job losses in March were broad-based. Even government payrolls, normally resilient during downturns, contracted — the first drop since December. Only education and health services added jobs. 

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