Worst is yet to come for job market

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NEW YORK (CNNMoney.com) -- It's no secret that the job market is bad.

The government reported Friday that the unemployment rate rose to a 25-year high of 8.1% in February, as employers cut 651,000 jobs from payrolls.

Still, as bad as those numbers are, some have argued that this jobs downturn is not as bad as the early 1980s. The unemployment rate peaked at 10.8% in late 1982.

But several experts say it would be a mistake to come to that conclusion. They argue that unemployment rate only hints at why this jobs downturn is worse than any since the Great Depression.

Over the last six months, 3.3 million jobs have been lost. That's the largest six-month job loss since the end of World War II.

Even adjusting for the large growth in the nation's job base in recent decades, this is still the biggest six-month job loss since March 1975.

Economists say the steepness of this decline will make it tougher for the job market to improve any time soon. The increasing job losses create a downward spiral in which businesses, faced with lower demand because people can't afford to buy their products, lay off even more people.

"The dramatic hemorrhaging of jobs means we're in this for the long-haul," said Heidi Shierholz, economist with Economic Policy Institute, a Washington think tank supported by foundations and labor unions.

Another reason why this downturn is more painful is because the layoffs have come from companies in virtually all parts of the economy.

"There's no place to hide in terms of job losses," said Lakshman Achuthan, managing director of Economic Cycle Research Institute. "And when measuring the impact of job losses, it's very important how pervasive the losses are. That's what makes this the worst since the Great Depression."

Achuthan points to something called the diffusion index of employment change, which showed that three out of four business sectors cut jobs in February. Job losses were even slightly more widespread in December and January, meaning that 83% of industries have lost workers over the last three months.

According to Achuthan, this was the first time in the past 30 years that there have been job losses in more than two-thirds of the sectors of the economy. When the recession started in December 2007, about 58% of industries were still adding jobs.

February marked the 14th straight month of job losses, the third-longest streak since 1939.

This long period of job losses is swelling unemployment rolls to record levels and causing long-term unemployment to rise sharply.

In February, 3.4% of the nation's workers had been out of work for 15 or more weeks, with nearly 2% of that total being out of work at least six months. Several states' unemployment funds have run out money as a result.

And most economists think the job market woes are far from over. Many economists are projecting job losses through the end of the year.

But even when the job losses end, the unemployment rate is likely to continue rising. That's because the modest hiring that will follow the downturn won't be enough to make up for population growth and unemployed Americans who had become discouraged starting to look for jobs again.

With that in mind, Dean Baker, co-founder of the Center for Economic and Policy Research, said he thinks the unemployment rate will hit a peak of above 10% sometime in 2010.

Finally, economists caution that the unemployment rate only captures a portion of Americans unable to find full-time jobs. It doesn't count people working at part-time jobs but cannot find a full-time job, for example.

And the average number of hours worked per week is now at a record low, according to Labor Department readings.

The unemployment rate also doesn't count many people who tell the Labor Department they want to work but haven't looked for work recently.

The government has a so-called underemployment reading which counts people working part-time jobs for economic reasons rather than by choice, as well as some who have become discouraged from looking for work.

That measure hit 14.8% in February - the highest reading since the Labor Department started calculating it back in 1994.

But there are other discouraged job seekers who are not looking because they don't think they can find work, have decided to return to school, or for other personal reasons. Counting all of those people in the underemployment rate takes it to 16.7% in February.

Comparable figures aren't available from the Labor Department for the pre-1994 period, but there are full-year government estimates for those outside the labor force who wanted to work in earlier years.

Using those figures, the underemployment rate reached a high of 21.5% in November 1982. While that's higher than this February, it's probably not fair to compare the current reading to the worst result of that downturn since most believe this jobs crisis is far from over.

"No one is going to tell you we're at the trough," said Baker.