US jobless rate jumps to 8.1pc

The jump in the US unemployment rate last month to the highest level in a quarter of a century suggests the recession is deeper than the Obama Administration forecasts, and additional measures may be needed to restart growth.

The jobless rate rose to 8.1 per cent in February as employers reduced payrolls by 651,000, the Labour Department said on Saturday. Losses have now exceeded 600,000 for three straight months, the first time that's happened since collection of the data began in 1939.

Unemployment has already reached the average rate the White House projected for the whole year. The Administration needs to keep its focus on repairing the banking system and implementing the stimulus rather than get diverted by other goals such as healthcare changes, said John Ryding, chief economist at RDQ Economics LLC in New York.

"They should be focused on stabilisation" of financial firms "and stimulus - and that should be the only job right now," Ryding said. "The question is, is it recession or is it something worse?"

While the President's US$787 billion ($1.56 trillion) stimulus plan aims to create or save 3.5 million jobs, the US has already lost 4.4 million since the recession began in December 2007, with more losses coming.

Tumbling global demand is prompting companies from General Motors to Sears Holdings to step up firings.

"Without any engines of growth, the labour market and the economy are likely to remain depressed for some time," said Joseph LaVorgna, chief US economist at Deutsche Bank Securities. LaVorgna now sees the jobless rate reaching 10 per cent by year-end, and he abandoned his call for economic growth to emerge in the second half of 2009.

Revisions to January and December statistics lopped an additional 161,000 jobs from previous estimates, the Labor Department's figures showed.

Payrolls were forecast to drop by 650,000, according to the median of 80 economists surveyed by Bloomberg News. The jobless rate was projected to jump to 7.9 per cent.

Factory payrolls fell by 168,000 after declining 257,000 in the prior month. Economists forecast a drop of 200,000. The decrease included 25,300 jobs in producers of machinery and 27,500 in makers of fabricated metal products.

Carmakers, at the heart of the manufacturing slump, continued to slash jobs and trim costs to stay in business. General Motors last month said it would cut 47,000 more positions globally while Chrysler announced 3000 more layoffs.

Car parts makers are also suffering. Ohio-based Timken, the supplier of bearings to the world's top five carmakers, said last Monday it would eliminate as many as 400 salaried jobs this year.

Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 375,000 workers after cutting 276,000.

The economy shrank at a 6.2 per cent pace in the fourth quarter of 2008, the weakest performance since 1982.

- BLOOMBERG