The Labor Department reported Friday that the U.S. economy shed 663,000 non-agricultural jobs in March, pushing the national unemployment rate to 8.5%, from 8.1% in February, the highest level since November 1983. March's losses were in line with Wall Street's expected drop of 661,000.
Though labor data are considered lagging economic figures, they're closely examined for their insight into consumer behavior. Friday's report indicates the U.S. labor market is still in crisis and a recovery is far off.
The Labor Department also revised the January payrolls figure to -741,000, from 655,000 jobs lost, while February was left unchanged at 651,000. (See "The Depressing Truth About America's Economy.") A toxic mix of falling home prices and frozen credit soured bets on Wall Street.
The market took the report in stride, as stocks traded at mostly flat levels. (See "Street Surmounts Bleak Jobs Report.") Demand for Treasuries fell, pushing the yield on the benchmark 10-year U.S. Treasury note to 2.87%, from 2.75% Thursday.
David Wyss, chief economist at Standard & Poor's, expects the declines in the labor market to continue, though at a diminished pace. "Employment will bottom around September," Wyss said. "We've already lost 5.1 million jobs, and I think we'll be down 2.0 million more before this is over."
Looking beyond the official 8.5% unemployment figure, Peter Morici, a professor at the University of Maryland, argued that when factoring in "discouraged" adults who have left the labor force and part-time workers who would prefer to work full time, the real unemployment rate is closer to 17.0%.
Meanwhile, the Institute for Supply Management reported its index for the services sector came short of expectations, falling to 40.8 in March, from 41.6 in February. Any reading below 50 indicates contraction.
The Obama administration has addressed the economic crisis on several fronts, using trillions of taxpayer dollars to clean up the mortgage mess and unchoke the credit markets. The $787.0 billion economic stimulus bill passed in February will not bolster business before summer but ultimately is seeking to create or salvage up to 4.0 million jobs.
The U.S. economy is caught in a nasty cycle. Employment fears and tight credit have led U.S. consumers to cut back on spending, particularly on large purchases over the last year. This in turn has forced businesses to cut production, leading to further job troubles. Meanwhile, the financial sector continues to reel from the subprime mortgage crisis it helped fuel as Treasury's efforts to fix the banks stall. Attempts by the Federal Reserve to stoke a slowing economy by bringing its borrowing rate down to virtually zero have yet to prove fruitful. However, different government-backed lending programs seem to be loosening constricted flows of credit. (See "The Buyer Of Last Resort.")