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Massive Job Losses Show Economy Sliding Into a Depression

650,000 More Jobs Lost in February
by Adam Price |
March 12, 2009
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San José, CA - On March 6, the Labor Department reported that the economy lost 650,000 more jobs in February. The report also said that the number of jobs lost in December and January was revised upwards by 150,000. This brought the total job losses since the recession began to 4.4 million, more than half lost in the last four months alone. The total number of jobs has shrunk by 3.2% since the recession began, the most in more than 50 years.

The official unemployment rate rose to 8.1% in February from 7.6% in January, the highest in more than 25 years. With more and more workers having their hours cut, a broader measure of unemployment including part-time workers who can’t find full-time work and those who have given up looking for work, rose to 14.8%, the highest rate on record.

Oppressed nationalities, who have historically been ‘last hired, first fired’ continue to be hardest hit by rising unemployment. African Americans had the highest rate of unemployment among the nationalities reported (the Labor Department doesn’t report unemployment figures for Native Americans) at 13.4%. Latinos saw the biggest one-month jump in unemployment, up 1.2% to 10.9%. Unemployment among Asian Americans is rising at the fastest rate, with their unemployment more than doubling, from 3% to 6.9% over the last year.

The national unemployment rate is an average, with many local areas being much harder hit. Here in California, the statewide unemployment rate topped 10% in January, when the national rate was 7.6%. Three counties had unemployment rates of over 20%, with the highest, Colusa County, having an unemployment rate of 26.7%. While Colusa is a small, rural county, Santa Clara County, home of Silicon Valley with a population of almost two million, had an unemployment rate of 9.3% in January.

The rising unemployment rate is fueling an increase in late mortgage payments. Earlier in the week the Mortgage Bankers Association reported that mortgages late at least 30 days jumped to new highs at the end of 2008, with more than 11% of all home-buyers behind on their payment or in foreclosure. Their report also noted that the problem was shifting from one of bad loans to the growing unemployment rate, as the delinquency rate on subprime adjustable rate mortgages fell (although still at more than 20%), while the delinquency rate on prime mortgages topped 5%. The location of late mortgages and foreclosures also spread from the housing bust states of California, Florida and Nevada to states where housing prices didn’t boom but which are racked by rising unemployment.

The rising unemployment rate is also causing an increase in personal bankruptcies. Over a million people filed for bankruptcy in 2008, up 31% from 2007. This was more than any year other than 2005, when many more filed to beat the new bankruptcy law, which made it harder and more expensive to file. The continued growth in mortgage delinquencies and bankruptcies is putting even more strain on the financial system. Bank loan losses, which started with subprime mortgages, have spread to prime mortgages, credit cards, auto loans and student loans.

More and more economists are saying that the soaring unemployment rate is pointing to a permanent restructuring of the U.S. economy. Many if not most of the jobs lost are not coming back: with millions of empty homes, construction will be slowed for years. Auto sales are down by almost half and more and more factory jobs being offshored; manufacturing jobs will not recover. The United States had record numbers of retail stores closed and jobs in this sector may not come back. Finally, the financial sector is downsizing dramatically and many of these jobs, from the local mortgage broker to Wall Street, are gone for good.

The current government unemployment insurance program is geared towards temporary joblessness. With more and more signs pointing to a long period of high unemployment, government jobs programs, like the 1930s Works Progress Administration (WPA), are needed.