SF Fed economist sees worst job losses in 50 years

By Ros Krasny

CHICAGO (Reuters) - Job losses in the current U.S. recession are likely to be the worst in 50 years, but fiscal stimulus will provide some relief, according to an economist at the San Francisco Federal Reserve Bank.

As of January 2009, employment had fallen by 2.6 percent from the December 2007 business-cycle peak, still less than the roughly 3-percent decline seen during the 1981-82 recession, research adviser Sylvain Leduc wrote in the bank's latest "FedViews" newsletter.

By the end of the recession, "employment should have decreased by roughly 4 percent from December 2007. We have to go back to the 1957-58 recession to see a larger percentage drop in employment," Leduc said.

The bleak assessment came as the U.S. Labor Department showed initial jobless claims at 627,000 for the week ended Feb 14. Continued claims for the week ended February 7 were a record 4.9 million.

Leduc forecast that U.S. real GDP would turn positive in the second half of 2009 on the back of Obama administration's $787 billion economic stimulus.

"The fiscal stimulus package has a sizable impact on our growth forecast, particularly in 2009. Moreover, we forecast that the unemployment rate would climb to nearly 10 percent, absent the fiscal initiative," he said.

Real GDP for 2009 will likely be minus 1 percent, according to the bank's forecasting staff. Without the stimulus program 2009, GDP was forecast to fall 2.2 percent.

The fourth-quarter 2009 jobless rate was pegged at 8.9 percent, falling to 8.5 percent by the fourth quarter of 2010. Without fiscal stimulus, the rate in both instances was forecast at 9.6 percent.