WASHINGTON — The nation's unemployment rate jumped to 8.5 percent in March, the highest since late 1983, as a wide swath of employers eliminated 663,000 jobs. It's fresh evidence of the toll the recession has inflicted on America's workers, and economists say there's no relief in sight.
If part-time and discouraged workers are factored in, the unemployment rate would have been 15.6 percent in March, the highest on records dating to 1994, according to Labor Department data released Friday.
The average work week in March dropped to 33.2 hours, a new record low. Since the recession began in December 2007, the economy has lost a net total of 5.1 million jobs, with almost two-thirds of the losses occurring in the last five months.
"It's an ugly report and April is going to be equally as bad," predicted Mark Zandi, chief economist at Moody's Economy.com.
The deterioration in the jobs market and a worse-than-expected reading of the strength of the services sector in March come despite a few hopeful signs recently that the recession — now the longest since World War II — could be easing.
Orders placed with U.S. factories actually rose in February, ending a six straight months of declines, the government reported Thursday. Earlier in the week, there was better-than-expected reports on construction spending and pending home sales. And last week a report showed that consumer spending — an engine of the economy — rose in February for the second month in a row — after a half-year of declines.
The job market traditionally doesn't rebound until well after a recovery starts. But the stock market generally bottoms out before the economy, and stocks have been rising for three weeks.
The Dow Jones industrial average spent most of Thursday over 8,000, the first time that happened since early February, before adding 216 points to close at 7,978. The Dow dropped about 60 points in midday trading, and broader indices also slipped.
Last month's tally of job losses was slightly higher than the 654,000 that economists expected. The rise in the unemployment rate matched expectations.
Employers cut 651,000 jobs in February when the jobless rate was 8.1 percent, the same as initially estimated. January's job losses, however, were revised much higher, to 741,000 from 655,000. Figuring prominently into that downgrade: much deeper job cuts in construction and professional and business services. January marked the worst payroll losses since the fall of 1949.
The number of unemployed people climbed to 13.2 million in March. In addition, the number of people forced to work part time for "economic reasons" rose by 423,000 to 9 million. Those are people who would like to work full time but whose hours were cut back or were unable to find full-time work.
Looking forward, economists expect monthly job losses continuing for most — if not all of — this year.
However, they are hoping that payroll reductions in the current quarter won't be as deep as the roughly 685,000 average monthly job losses in the January-March period.
In the best-case scenario, employment losses in the present quarter would be about half that pace, some economists said. That scenario partly assumes the economy won't be shrinking nearly as much in the present quarter.
But as the economic downturn eats into their sales and profits, companies are laying off workers and resorting to other cost-saving measures. Those include holding down hours, and freezing or cutting pay, to survive the storm.
Job losses were widespread last month. Construction companies cut 126,000 jobs. Factories axed 161,000. Retailers got rid of nearly 50,000. Professional and business services eliminated 133,000. Leisure and hospitality reduced employment by 40,000. Even the government cut jobs — 5,000 of them.
Education and health care were the few industries showing any job gains.
Meanwhile, the services index from the Institute for Supply Management, a Tempe, Ariz.-based trade group of purchasing executives, fell to 40.8 last month from 41.6 in February. Economists surveyed by Thomson Reuters expected the index to edge up to 42.
Any reading below 50 indicates contraction.
The report, released Friday, is based on a survey of the institute's members in 18 industries and covers such indicators as new orders, employment and inventories. About three-quarters of Americans work in service-providing industries such as hotels, retail, education and health care.
Federal Reserve Chairman Ben Bernanke said the recession could end later this year, setting the stage for a recovery next year, if the government is successful in bolstering the banking system. Banks have been clobbered by the worst housing, credit and financial crises to hit the country since the 1930s.
Even if the recession ends this year, the economy will remain frail, analysts said. Companies will have little appetite to ramp up hiring until they feel the economy is truly out of the woods and any recovery has staying power.
Given that, many economists predict the unemployment rate will hit 10 percent at the end of this year. The Fed says unemployment will remain elevated into 2011.
Economists say the job market may not get back to normal — meaning a 5 percent unemployment rate — until 2013.
"There's going to quite a long haul before you see the jobless rate head down," said Bill Cheney, chief economist at John Hancock Financial Services.
To brace the economy, the Fed has slashed a key bank lending rate to an all-time low and has embarked on a series of radical programs to inject billions of dollars into the financial system.
And the Obama administration had launched a multi-pronged strategy to turn the economy around. Its $787 billion stimulus package includes money that will flow to states for public works projects, help them defray budget cuts, extend unemployment benefits and boost food stamp benefits.
The administration also is counting on programs to prop up financial companies and reduce home foreclosures to help turn the economy around.
Still, skittish employers announced more job layoffs this week.
3M Co., the maker of Scotch tape, Post-It Notes and other products, said it's cutting another 1,200 jobs, or 1.5 percent of its work force, because of the global economic slump. Healthcare products distributor Cardinal Health Inc. said it would eliminate 1,300 positions, or about 3 percent of its work force, and semiconductor equipment maker KLA-Tencor Corp. said it will cut about 600 jobs, or 10 percent of its employees.