US unemployment rate jumps to 8.5% in March

US unemployment rate jumps to 8.5% in March

WASHINGTON : The US unemployment rate leapt to a new 25-year high of 8.5 per cent in March as recession-battered employers shed another 663,000 jobs, the Labor Department reported on Friday.

The monthly snapshot of the labour market, seen as one of the best indicators of economic momentum, showed widespread losses across most sectors of the economy as the jobless rate rose from 8.1 per cent in February.

The figures failed to provide a clear signal that the US economy has hit bottom after the worst recession in decades, but some analysts said the data did appear to confirm some easing of the pace of economic decline.

Since the recession began in December 2007, a staggering 5.1 million jobs have been lost, with 3.3 million occurring in the past five months, the agency said.

The report was roughly in line with forecasts from private economists, who on average had expected 658,000 job losses and an unemployment rate of 8.5 per cent.

The jobless rate is the highest since November 1983.

The weak labour market offered a clouded outlook for what some analysts say is a "bottom" for an economy ravaged by a housing meltdown that has hammered the banking sector and squeezed credit.

"The losses continue to be severe but we do see, and I think the market sees, some apparent peaking in the rate of decline, and that stabilisation is providing a little bit of cheer to the market," said Peter Kretzmer, senior economist at Bank of America.

"We've moved to a different phase of the business cycle," he said, with consumer spending steadying but companies still cutting investment and inventories.

This suggests "several more months of severe declines before things start to improve," Kretzmer said.

Revised data showed January job losses rose to 741,000, from an earlier estimate of 655,000 lost. The loss for February remained unchanged at 651,000.

Some said the markets were bracing for a potentially worse report.

"We were braced for a reading of 720,000 before expecting the 'freak-out' button to get hit," said Jon Ogg at 24/7 Wall Street.

"All we can hope is that the slowdown in firings starts to come into play if things in the economy start to see drops that are not as bad as the Depression-trade was indicating just a month ago."

The total number of unemployed rose to 13.2 million in March, with the number of long-term unemployed - jobless for 27 weeks or more - rising to 3.2 million.

In March, the goods-producing sector lost 305,000 jobs including 161,000 in manufacturing and 126,000 in construction.

The service sector, which provides the majority of US jobs, shed 358,000 positions including 43,000 in the financial sector.

The only sector to add employment was education and health care, up 8,000, while government employment fell by 5,000.

The average work week contracted to 33.2 hours from 33.3 hours, which analysts said could mean lower production and income, hurting the economy.

The US economy contracted at a steep 6.3 per cent pace in the fourth quarter as the recession deepened. The government will estimate first-quarter gross domestic product later this month.

Julia Coronado, economist at Barclays Capital, called Friday's report "uniformly weak, with sizable job losses across all sectors".

Coronado is forecasting a 5.5 per cent drop in US output in the first quarter of 2009. But she said the latest data shows an 8.7 per cent quarterly drop in total hours worked, which she said offers a good proxy for economic output.

"So there is a risk (first-quarter GDP) could be worse," she said.

- AFP/ms