The U.S. jobless rate rose in March to the highest level in 25 years and payrolls plunged, exposing the economy to the risk of renewed declines in spending that would scuttle a recovery, economists said before a report today.
Unemployment jumped to 8.5 percent from 8.1 percent in February, according to the median of 79 estimates in a Bloomberg News survey. The figures may also show employers cut 660,000 workers from staff, bringing total losses since the recession began to 5 million, the biggest slump in the postwar era.
Evaporating jobs and declining pay mean President Barack Obama’s pledge to create or save 3.5 million jobs through tax cuts and government spending may fall short of what’s needed to revive the world’s largest economy. Federal Reserve Chairman Ben S. Bernanke has conceded joblessness could top 10 percent under a worst-case scenario.
“The unemployment rate is not done rising and the gain in March won’t be the last,” said Stuart Hoffman, chief U.S. economist at PNC Financial Services Group Inc. in Pittsburgh. “With jobs still declining and incomes being squeezed, consumer spending still looks quite weak.”
The job cuts have been spreading from manufacturers like Johnson Controls Inc. and Dana Holding Corp., to service providers like International Business Machines Corp. and even the U.S. Postal Service.
The last time the unemployment rate was at 8.5 percent was in November 1983, when the economy was recovering from the 1981- 82 recession that pushed the rate to almost 11 percent. Then Fed Chairman Paul Volcker boosted interest rates to quell soaring inflation following the 1970s fuel crisis.