WASHINGTON – Dismal employment data released Friday isn’t just the latest sign the U.S. economy is in recession. It’s also a warning that this one could hurt more than the previous two.
The loss of almost 250,000 jobs in the first quarter of this year is comparable to job losses at the start of recessions past. Once the data is revised, analysts say, it is likely to show a labor market – and broader economy – in even deeper trouble.
Sagging employment data is a single indicator of a recession, which under one rule is defined as six straight months of declining gross domestic product. GDP, which increased at a meager 0.6 percent annual rate in the fourth quarter of last year, measures the value of all goods and services produced in the U.S. and is the best barometer of the nation’s economic health.
Even if the oft-forecast recession of 2008 mirrors the climate of the relatively mild 2001 recession – as many economists expect – hundreds of thousands more Americans stand to lose their jobs.
“We’re at the beginning of a protracted period of labor market contraction,” said Jared Bernstein, senior economist with the Economic Policy Institute in Washington.
Employers slashed 80,000 jobs in March, and the loss of 76,000 jobs in both January and February was deeper than originally reported, according to Labor Department data. By comparison, there were 355,000 jobs cut during the first three months of the 2001 recession, and 332,000 in the 1990 recession.
“As is typical at cyclical turning points, the revisions have been in the direction of the economy’s momentum,” David Resler, chief economist at Nomura Securities, wrote in a research note. “Unfortunately, this similarity also offers no reason to hope that the job cuts will not accelerate as they have in the past.”
Last month’s cuts were the most since March 2003, when the labor market was still struggling to recover from the 2001 recession. Job losses from that economic downturn did not stop until August of 2003, marking “the longest jobless recovery on record,” Bernstein said.
More than 1.6 million jobs were lost in the March-November 2001 period, compared with about 1.3 million from July 1990 through March 1991, which defined that recession.
Compared with last year, wages grew about 3.7 percent, on average, in the first three months of 2008. That pace is slightly slower than the 4 percent and 4.1 percent growth experienced in the opening three-month periods of the 2001 and 1990 recessions, respectively.
Despite similar job loss and wage growth data thus far, economists have different views on how the current recession will compare to the last one.
Bernard Baumohl, managing director of the Economic Outlook Group in Princeton, N.J., said the 2008 recession is shaping up to be “much more serious … (because) there was no credit crunch back then … (and) inflation was a lot lower in 2001 so workers were able to see real income gains.”
“Home prices were also appreciating during the 2001 recession,” Baumohl said. “That’s why I believe the economy will suffer more and for a longer period of time.”
Job losses in 2001 were largely isolated to the high-tech bubble bust, while payrolls this year have shrunk across a variety of sectors, including construction, manufacturing, retail and financial services.
Brian Bethune, chief U.S. financial economist for Global Insight, disagreed. The duration of the current recession has yet to be determined, but “unless something really goes wrong with the (federal) financial stimulus package, we’re probably looking at some stabilization in employment by the summer,” he said.