The U.S. economy has now lost more than 4.2 million jobs since the recession started in December 2007 and a staggering 2.5 million in the past four months. A Bloomberg News economist survey had forecast the economy to shed 648,000 jobs in February.

February job losses by sector include: manufacturing, -168,000; construction, -104,000; temporary help, -78,000; financial services, -44,000; retail trade, -40,000, and leisure and hospitality, -33,000.

What was one of the few job sector bright spots? Health care, which added 27,000 jobs.

Real-world unemployment rate is worse

As bad as the official job loss and unemployment statistics are, economists say they don't reflect the true nature of the nation's poor job picture.

That's because the Labor Department's unemployment rate does not include discouraged workers -- those people who are unemployed but who have quit searching for work, either because they can't find suitable employment (or any job) or because don't think they'll be able to find one. If one includes discouraged workers, the nation's unemployment rate easily jumps above 10 percent and perhaps higher, many economists agree.

Further, when one includes part-time workers who want full-time work but can't secure it, the nation's underemployed / unemployment rate rises to more than 12 percent, perhaps more.

Another tell-tale stat regarding the weak job market conditions concerns the number of long-term unemployed, which soared to 2.9 million from 2.6 million in January. Over the past 12 months the number of long-term unemployed has more than doubled from 1.3 million in January 2008. Economists generally agree that any long-term unemployment total above 1.2-1.5 million is unfavorable; levels above 2 million reflect weak economic conditions, with negative consequences for state budgets (due to increase social spending costs), and for mortgage foreclosures, among other social costs.

Are we headed for another Great Depression?

The U.S. large job losses over the past six months have raised questions concerning whether the economy is entering a second Great Depression. Will a second Great Depression -- economists usually define a depression as a one-year decline in U.S. GDP of 10% or more -- occur? No economist one can predict that with any reliability, but it is safe to predict that if the U.S. economy continues to lose 500,000 jobs a month, it will be in a depression.

During the Reagan recession of 1981-82, which was a bad recession that saw unemployment rise to more than 12%, U.S. GDP fell 3%. The Congressional Budget Office forecasts U.S. GDP to fall -2.2% in 2009 -- a very serious, damaging recession, but still not at Great Depression levels (pdf). That said, the job loss trend is horrible and if the U.S. fails to stabilize the financial system and get credit flowing more freely to businesses and consumers, one could see how unemployment levels could rise to near-Depression levels.

What can U.S do to create jobs?

So then, what's the best way to create jobs and address the problem of rising unemployment?

Conservative economists, also called monetarists, say the correct action would involve cutting taxes, cutting government spending, and reducing regulations -- all of which they argue will stimulate the economy, prompting companies to hire more employees. These monetarists also say cutting wages in all sectors where there are surplus adults willing to work would also lead to more jobs being created. Some would even favor busting unions and breaking union contracts as a way to create more jobs.

Conversely, liberal economists, many of whom are Keynesians, say the correct way to create jobs would involve creating demand via large fiscal stimulus packages and, if necessary, by direct government jobs programs for work that needs to be done in society. Keynesians also view, with few exceptions, attempts to cut wages of workers as a step backward -- something that in many cases would reduce already low salaries and cause the the nation to regress into pre-modern, universal sweatshop-like working conditions. Further, unions and other groups that support organized labor argue that they are the major reason American workers have decent wages and they would view any attempt to circumvent or hurt them and lower wages as an attempt to move to a feudal-like era of oppression.

Which path will the U.S. choose?

What tack is the U.S. likely to take? Given current trends, it looks like fiscal stimulus and the Keynesians will prevail, but it also looks like globalization will lead to further wage declines is many job categories, and that, according to FT.com economist Martin Wolf, points to another policy task for President Obama and Congress: improving the U.S. social safety net. Given the speed and scope of job losses and life / job disruption caused by globalization, Wolf says the U.S. must establish universal health care, more generous unemployment insurance, and increased support for those with low wages.

Whichever path the United States takes, one thing is certain: job growth must resume. The whole point of the American economic system -- the two main reasons many people tolerate its harshness -- are profits and jobs. Take any one away and a systemic adjustment usually follows. Take job growth away for a long period and a major pressure is placed on the system, and these are the periods when the biggest economic reforms have occurred.

No one knows how the American system of corporate capitalism will respond this time -- in the era of unprecedented wealth, material abundance, opulence, conspicuous consumption, and technological advance -- if the unemployment rate keeps rising. The best outcome would involve not getting to a point when investors and the nation at large would find out -- which is why public officials need to find ways to create many more jobs, and soon.

Financial Editor Joseph Lazzaro is based in New York.