U.S. faces biggest job losses since 1949

The U.S. economy probably lost more jobs in February than at any time since 1949, a plunge that may force further reductions in spending and send more Americans into bankruptcy, based one economists forecast today.

Employers cut payrolls by 650,000 and the unemployment rate probably surged to a 25-year high of 7.9 percent.

Tumbling demand globally is prompting companies from General Motors Corp. to Sears Holdings Corp. to step up firings, perpetuating a vicious circle of job losses and spending cuts. The Obama administration has set aside immediate concerns about a budget gap and pushed through a $787 billion stimulus plan aimed at creating or saving 3.5 million jobs.

Economists’ estimates ranged from payroll declines of 500,000 to 800,000. Forecasts for the jobless rate, which climbed to 7.6 percent in January, ranged from 7.8 percent to 8.1 percent.

The projected drop in employment last month would be the biggest since a slump of 834,000 in October 1949, when about 500,000 steel workers went on strike demanding better pension and health-care benefits.

The economy lost 598,000 jobs in January, bringing the total drop in employment since the recession began in December 2007 to 3.6 million, the most of any downturn since 1945.

The report may also show manufacturers cut 200,000 jobs, according to the survey. January’s 207,000 factory payroll reduction was the biggest since 1982.

The slump in employment was foreshadowed by first-time jobless claims, which surged last month to the highest level in 26 years. Federal Reserve Chairman Ben S. Bernanke this week cited the rise in applications as suggesting that labor market conditions may have worsened further in recent weeks.

Automakers, at the forefront of the manufacturing slump, have continued to slash jobs to trim costs and stay in business. General Motors last month said it would cut 47,000 more positions globally as it sought $16.6 billion in new U.S. loans.

Banks, retailers and other service companies that make up almost 90 percent of the economy have also been battered. Sears last week said it would close 24 stores, on top of eight closings announced earlier, after its fourth-quarter profit fell 55 percent due to weak holiday sales.

Even government jobs are endangered. Michigan Governor Jennifer Granholm plans to fire 1,500 workers to balance the budget as tax revenue has plunged due to the auto slump.

Economists polled by Bloomberg last month forecast consumer spending will contract through the first six months of this year after sliding in the last half of 2008. Purchases have not contracted for four consecutive quarters since records began in 1947.

If the recession persists through the first half of this year, it would be the longest since the Great Depression. The economy shrank at a 6.2 percent pace in the fourth quarter of 2008, the weakest performance since 1982.

In his first speech to a joint session of Congress, Obama said on Feb. 24 the economy has left “our confidence shaken” and the credit crisis paralyzing the banking system will need to be fixed or “our recovery will be choked off before it even begins.”