Jobless Rate Above 10% Defines Recession as Bernanke Predicted

By Peter Robison

March 13 (Bloomberg) -- Sergio Barreto landed his first job out of college during the recession that began in 1990, as a mechanic for United Airlines. He survived the next one a decade later, selling semiconductor materials. This time, he may be out of luck.

Barreto, who has an engineering degree from San Jose State University and 12 years experience in the chip industry, has been out of work since he was laid off in December with a month’s severance pay from closely held CoorsTek Inc.’s sales office in Fremont, California.

“I was very surprised because I was one of the top sellers,” said Barreto, 46, whose wife gave birth to their second child in October. “I’m in survival mode.”

At least 4.4 million jobs have been claimed by the U.S. recession that began in December 2007, cutting across the country and the economy. Positions have been eliminated by employers as diverse as Microsoft Corp., KB Toys Inc., Dartmouth College and the nonprofit organization that produces “Sesame Street.”

“This recession is incredibly broad-based,” said Mark Vitner, a senior economist at Wachovia Corp. in Charlotte, North Carolina. “Parts of the country that have traditionally weathered recessions fairly well are being impacted.”

Contractions are usually centered in one sector or region, such as manufacturing in the Midwest in 1982, he said. This one, propelled by a credit crisis spawned by a real-estate slump, is simultaneously rooted in housing, financial services and auto manufacturing, he said.

Highest Since 1984

Unemployment climbed in January in every U.S. state except Louisiana, and the decline there, to 5.1 percent from 5.5 percent in December, was due to rebuilding from Hurricane Katrina, the Labor Department said.

The jobless rate topped 10 percent in four states, led by Michigan, where at 11.6 percent it was the highest since May 1984, according to data compiled by Bloomberg.

South Carolina, at 10.4 percent, and California, with 10.1 percent, also saw their steepest rates in a quarter-century. Unemployment in Rhode Island was 10.3 percent, greater than since at least 1976, according to the data.

Wyoming’s was the lowest in January at 3.7 percent.

An average unemployment rate of 10 percent for a period of time is “certainly well within the realm of possibility,” Federal Reserve Chairman Ben S. Bernanke said during congressional testimony on March 10.

‘Like a Cancer’

While that outcome isn’t the “central tendency” of Fed forecasters, the central bank is using that level in an adverse scenario model that will determine whether banks need more capital, Bernanke said.

Workers bearing the brunt span economic, social and regional lines, according to interviews conducted around the country. They include Mimi Bardet, who is losing a six-figure job this month after 23 years at Time Warner Inc.’s Warner Brothers in Burbank, California, and Tanya Jones, who moved back to subsidized housing in Trenton, New Jersey, and gave up her 2002 Ford Explorer after she lost a $1,500-a-week nursing-home job in November.

“It’s like cancer -- there are so many people who know somebody going through this,” said Lynne Bee, 52, of Lawrenceville, Georgia, who was fired as a dental office manager in January.

California, which led the nation in mortgage foreclosures last month, had the most job losses, with 79,300. Next were Michigan and Ohio, battered by the auto industry collapse, with 60,800 and 59,600, respectively.

‘More Discouraging’

Southern states where the population is rapidly growing through immigration or migration have also been hard hit as their shrinking economies can no longer absorb the labor force, Vitner said. Georgia and Florida each had an 8.6 percent unemployment rate in January, and neither state topped 6 percent in 2001, according to data compiled by Bloomberg.

“I’ve tried to shift around to different professions and change my work status, but it just keeps hitting different markets,” said Mark Risetter, 54, a Dallas machinist laid off six weeks ago from Atco Rubber Products Inc., which makes insulated ducts for homes.

For Risetter, who has leukemia that is in remission, it was the third job loss since 1982. “It’s more discouraging now than it’s been in the past,” he said.

At the height of the Depression in 1933, 24.9 percent of the workforce was unemployed and shantytowns of crates and abandoned cars sprang up, according to the Franklin D. Roosevelt Presidential Library in Hyde Park, New York.

‘Shocked’

In Sacramento, there’s an echo in the dirt along the American River, where more than 300 people have pitched tents. Fewer than a dozen tents were at the site a year ago, said Joan Burke, director of advocacy at Sacramento Loaves & Fishes, which provides food and medical services.

“These are people that haven’t been homeless before and are shocked to find themselves in this situation,” she said.

At Ministry of Caring in Wilmington, Delaware, 10.4 percent more meals were served last year than in 2007, some to people who once had steady jobs, said Brother Ronald Giannone, a Capuchin Franciscan friar and the nonprofit’s executive director.

“We’re seeing what I call the ‘new poor,’” he said. “The last thing in the world these people ever expected to do was to have to rely on our facilities to eat, but when it comes down to paying the utilities or buying food, they are opting to keep the lights on.”

One Exception

Delaware’s 6.7 percent unemployment rate is already higher than the 5.8 percent at which it peaked in the 2001 recession, said John Stapleford, a senior economist at Moody’s Economy.com who monitors mid-Atlantic states.

Nationally, the jobless rate moved to a 25-year high of 8.1 percent in February.

The rate will reach 9.4 percent this year and remain above last month’s rate through at least 2011, threatening the nation’s longer-term growth potential, according to the median forecast of economists surveyed by Bloomberg News.

One exception to the grim data is in Washington, D.C., and neighboring Maryland and Virginia. The Obama administration may create 100,000 jobs to help administer the $787 billion economic stimulus package, said Max Stier, who runs the Partnership for Public Service, a non-profit group that monitors government employment.

15,000 People

With federal spending in the metro area increasing in 2009, as it has every year since 1983, that is trickling into the local economy, according to the Center for Regional Analysis at George Mason University in Fairfax, Virginia.

Sales at Morton’s steakhouse in downtown Washington are up almost 3 percent from the same time a year ago, said Dan Festa, 41, the general manager. The restaurant has hired nine servers since December, he said.

Business at Washington’s Ritz-Carlton hotel is comparable to two years ago, before the recession hit, said Elizabeth Mullins, who oversees four of the chain’s hotels.

“So far, touch wood, we’re lucky to be in DC!” Mullins said. “I don’t want to rub it in, but I’m so glad to be here.”

In Atlanta, more than 15,000 people attended a job fair at the Georgia World Congress Center this week, three times the number at a similar event three years ago, said State Labor Commissioner Michael Thurmond. A workshop called “Stimulus 101: What’s in it for you?” drew the most people, he said.

“There is a tremendous amount of anxiety and fear,” Thurmond said. “It is a Great Recession, no question about it.”

To contact the reporter on this story: Peter Robison in Seattle at robison@bloomberg.net