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People crowd a job fair sponsored by employment website Monster.com as part of their "Keep America Working" tour at a hotel in New York's Times Square on March 5.

Bad as Friday’s grim jobs report was — 8.1 percent unemployment rate, 651,000 jobs lost in February, 4.4 million shed since the recession began — the labor market’s pain is likely to continue until well into 2010.

Wall Street economists, who are not typically paid to see the glass half-empty, warn that more bad news is coming in the months ahead.

“The economy is in a tailspin. Businesses are jettisoning jobs at an unprecedented pace,” said Richard Yamarone, economist at Argus Research. “The labor market remains in free-fall,” said Nigel Gault Chief US Economist IHS Global Insight. “The recession is deepening; there is no sign yet even that the rate of contraction is slowing.”

“Horrendous! There can be no other word to describe this employment report,” said Ryding. “Unfortunately, the weekly jobless claims data suggest more of the same is coming for March.

Since the recession began in December 2007, the economy has lost 4.4 million jobs, more than half of which occurred in the past four months. That brings the total to 12.5 million full-time jobs and the official unemployment rate to 8.1 percent.

Another 8.6 million have been forced to work part time for “economic reasons” as employer cut back hours to cut costs. The number of so-called “discouraged workers” – those who are out of work and have given up looking for a job – has more than doubled since last year. When those two groups are included, the jobless rate jumped by almost a full percentage point this month to 14.8 percent.

On Monday, economists at Goldman Sachs said they expect the headline unemployment rate to continue to rise to 9.5 percent by the end of this year and then go to 10 percent by the end of 2010.

Coming on top of trillions of dollars in lost home values and trillions more in stock market losses, the collapse of the job market is now fueling a downward economic spiral. With less spending power and fearful of further job losses, consumers have sharply cut spending that had made up some 70 percent of Gross Domestic Product.

The contraction appears to be accelerating. The latest government figures show GDP falling at an annual rate of 6.2 percent in the last three months of 2008. Some economists now believe that if the pace of jobs losses continues — they currently average more than 600,000 a month — the economic contraction could be more severe in the first quarter of this year.

Earlier this week, Federal Reserve Chairman Ben Bernanke told Congress that the economic data “show little sign of improvement” and that “labor market conditions may have worsened further in recent weeks.”

The Obama administration is counting on a package of measure to get the economy moving again and employers back in a hiring mood. The list includes an almost $800 billion package of spending and tax cuts; a $70 billion bailout program for the nation’s troubled banks; and a $75 billion effort to head off an estimated nine million home foreclosures.

“We have a responsibility to act and that’s what I intend to do as the president of the United States of America,” Obama told a graduating class of new police officers in Ohio Friday.

But it will be at least several months before the stimulus spending begins to flow through the economy. In the meantime, layoffs will likely continue.

“I think businesses have already made up their minds,” said Mark Zandi, chief economist at Moody’s Eonomy.com. “They did their forecast for revenues for 2009 in late 2008. They marked them down, and now they’re trying to get their cost structure down. And that means cutting payroll. No matter what the stimulus number was, I think we would see these job losses anyway.”

Zandi said there may also be a lag effect in the jobless numbers because laid off workers given severance packages are counted as employed until those payments run out.

But the impact of the stimulus spending will be muted as long as the banking system and credit markets remain crippled.

Despite some signs of life in corners of the credit markets, which shut down last fall, banks are still burdened with massive losses from bad loans. Much of the investor-funded market for consumer lending like credit cards and car loans remains frozen.

While some large companies have had success selling fresh debt, the cost for others remains high. One measure of that is the price of so-called credit default swaps, a kind of insurance policy against a large corporate borrower defaulting on its debt.

The cost of credit defaults swaps for Berkshire Hathaway, for example, show that investors think the company run by legendary investor Warren Buffett is a riskier bet than bonds issued by Vietnam, according to Michael Hartnett, co-head of International Investment Strategy at Merrill Lynch. General Electric, once considered the bluest of blue chip companies, is now seen as riskier than Russian debt, based on the the price of those swaps, said Hartnett.

“In that kind of environment you are still trying to pursue cash if you’re running the company,” said Robert Barbera, chief econmist at the investment firm ITG. “And that means cutting hours or cutting workers.”

Amid disarray in the credit markets and the free fall in the job market, the stock market has suffered the worst collapse since the Crash of 1929. Based on the broadest measure, stock prices have fallen 56 percent since the Oct., 2007 peak, wiping out some $11.1 trillion of wealth.

As investors look for a bottom in the economy as a sign of recovery in stocks, Barbera thinks they may have it backwards. As long as the markets remain crippled, layoffs will likely continue, he said.

“The employment data isn’t going to get better and drive stocks up,” he said. “The markets are going to get better and then we’re going to see better news on Main Street.”

That’s why many investors and companies are watching closely the government’s efforts to shore up battered banks and get lending flowing again to consumers. After a series of missteps, the government is now subjecting banks to a “stress test” to see if they can withstand a bigger downturn in the economy. Some $700 billion has been spent or committed to provide more capital to the most troubled banks.

But critics say lending will remain frozen until the government moves more aggressively to buy hundreds of billions of dollars in bad loans that are clogging up the credit system. The Treasury has said it is working on a joint public-private entity to buy those wasting assets, but the announcement is said to be several weeks away.

One reason for the delay may be the Obama administration’s sluggish pace of filling senior positions at the Treasury. This week, Treasury Secretary Tim Geithner’s staffing plans suffered more setbacks, after candidates for two senior jobs withdrew their names from consideration.

Five weeks into his tenure, Geithner has yet to name a single top deputy or assistant secretary, leaving Treasury without enough people authorized to make decisions or represent the department in meetings with stakeholders. At the department’s office of public affairs, for example, all eleven of the most senior positions listed on the Treasury’s web site are vacant.

“The crucial thing is we are moving forward,” said Christine Romer, the Chair of the White House’s Council of Economic Advisers on Friday. “Treasury has a very large, very important and talented career staff that is there. Secretary Geithner is putting together a team as fast as he can, but believe me, work is going on night and day. And I think they are going to be able to do what they need to do.”

Geithner told a Senate panel Wednesday that he hoped “to come up for the committee soon with a full slate of very strong people.”

But some Wall Street veterans say the financial markets are losing confidence that the Obama adminstration is moving quickly enough to address the biggest crisis it faces.

“Geithner is stuck there all by himself trying to do everything,” said David Wyss, chief economist at Standard & Poor’s in New York. “They don’t have anybody confirmed, and Treasury is a big shop to try to run with one person, especially right now.”