Unemployment rate spikes to 8.1 percent, highest level since 1983.    The Bureau of Labor Statistics (BLS) reported that the unemployment rate jumped 0.5 percentage points in February to 8.1 percent, the highest unemployment rate since the aftermath of the recession of 1981-82 (the unemployment rate reached 10.8 percent during that recession).  This 0.5 percentage point increase is the largest jump during the current recession (although the unemployment rate had a similar spike in May 2008) and signals that the deterioration in the labor market is far from over.  The number of involuntary part-time workers, those who would like to be working full-time but can only find part-time work, rose by 838,000 to 8.5 million in February, an increase of 3.8 million over the past year.  The broadest measure of the unemployment rate published by the BLS, which includes the unemployed, discouraged workers, and involuntary part-time workers, increased 0.9 percent in February to 14.8 percent.

Third straight month of over 600,000 jobs lost.  The BLS also reported that 651,000 payroll jobs were lost in February, bringing the total to 4.4 million jobs lost since the beginning of the recession in December 2007. The recession is already worse than the corresponding point of the last 5 recessions in terms of job losses as a proportion of peak employment. (See Chart)  The proportion of job losses is already nearing the level of the 1981-1982 recession and will soon surpass it if job losses continue to accelerate.  Job cuts were widespread, but sectors like construction (-104,000), manufacturing (-168,000), and professional and business services (-180,000) were particularly hard hit.  In testimony before the Joint Economic Committee last Friday, BLS Commissioner Dr. Keith Hall noted that, during the current recession, the economy has seen 4 of the 10 worst job-losing months since 1940, when the government first began tracking the data.

Personal income and outlays increases slightly in January.  Personal income increased in January by 0.2 percent after adjusting for inflation.  This increase was mainly attributed to government and military wage and entitlement cost-of-living increases. While forecasters still expect personal consumption expenditure (PCE) to fall in the first quarter of 2009, they are optimistic that the decline won’t be as steep as the real declines in the third quarter of 2008 (-3.8 percent SAAR*) or the fourth quarter of 2008 (-4.3 percent SAAR).  However, household balance sheets have taken a considerable hit because of declines in the stock market and housing market, leading consumers to increase savings.  Personal savings as a percentage of disposable income was 5.0 percent in January, an increase over the 3.9 percent reported in December (and much higher than the 1.1 percent savings rate average over the previous 5 years).  While this increase in savings will help strengthen household balance sheets, in the short-run, it is likely to make the current downturn worse by reducing aggregate demand.
* SAAR indicates that percent changes are calculated at Seasonally Adjusted Annual Rates.

JEC HEARING ON TARP ACCOUNTABILITY WED, MARCH 11, 2009, 10:30 A.M.