As of January 2009, employment had fallen by 2.6% from the December 2007 business-cycle peak, still less than the roughly 3% 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% 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 Feb. 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%, absent the fiscal initiative," he said.
Real GDP for 2009 will likely be minus 1%, according to the bank's forecasting staff. Without the stimulus program 2009, GDP was forecast to fall 2.2%.
The fourth-quarter 2009 jobless rate was pegged at 8.9%, falling to 8.5% by the fourth quarter of 2010. Without fiscal stimulus, the rate in both instances was forecast at 9.6%.
Leduc said the inflation rate should stabilize "at a very low level" after plunging in the fourth quarter of 2008.
The San Francisco Fed's forecasters expect the core personal consumption expenditures index, a measure of inflation, to rise slightly from the 0.5% annual rate hit in the fourth quarter, and remain at about 0.75% throughout 2009.
Several Fed officials recently have noted that even if outright deflation does not occur, very low inflation will push up "real" interest rates at the worst possible time for the struggling economy.
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