The jobs in the U.S. continue to drop in March, pushing total losses past five million jobs since the recession started 16 months ago.

 The unemployment figures are a sober reality check on the economy, bringing us back down a bit after some mildly good news on housing, automobiles and manufacturing. If jobs continue to be lost at their current pace, nervous consumers will be more likely to avoid buying big-ticket items, instead hording what little money there is and only buying essentials. But purchasing big ticket items and non-essentials is what usually propels recoveries, and avoiding this could keep us in financial difficulties for some time to come.

Nonfarm payrolls dropped 663,000 in March, the U.S. Labor Department said today, largely matching Wall Street expectations, according to a Dow Jones Newswires survey. However, January was revised to show a steeper loss of 741,000.

January's drop is the third largest on record. The first was a two million job plunge in 1945 and the second was a drop of 834,000 in 1949, and these two were driven by single events including a massive coal and steel strike and the end of World War II. This is not the case this time.

Since the recession started in December 2007, the economy has shed 5.1 million jobs, with over two million of those losses in the past three months alone, essentially this year.

Keith Hall, Commissioner of the Bureau of Labor Statistics said, "These declines have been widespread across industry sectors, but particularly sharp in manufacturing, construction, and temporary help services."

Layoffs announcements continued last month across sectors including: United Technologies Corp. (UTX); General Dynamics Corp. (GD); National Semiconductor Corp. (NSM); and Wal-Mart Stores Inc. (WMT).

The unemployment rate, which is calculated using a survey of households as opposed to companies, jumped 0.4 percentage points to 8.5%, the highest since November 1983. In its latest report on the U.S. economy, the Organization for Economic Cooperation and Development said it expects the jobless rate to reach 10.5% by the end of next year.

Average hourly earnings increased a modest $0.03, or 0.2%, to $18.50. That was up just 3.4% from one year ago, a sign that inflation isn't a threat.

To be sure, the severe first-quarter payroll drop doesn't mean the economy can't find its footing later this year, since employment has lagged the last couple of recoveries. Indeed, consumer spending -- which accounts for about 70% of gross domestic product -- likely expanded last quarter despite the loss of two-million-plus jobs.

But if that pace doesn't decelerate noticeably by the middle of the year, then hopes for even a modest recovery this year would increasingly look out of reach.

According to Friday's report, hiring last month in goods-producing industries fell by 305,000. Within this group, manufacturing firms cut 161,000 jobs, bringing the total since the recession began to 1.5 million.

Construction employment: -126,000

Service-sector employment: -358,000.

Retail trade: -47,800 jobs

Leisure and hospitality businesses: -40,000 as households cut back on discretionary spending.

Temporary employment (a leading indicator of future job prospects): -70,000+.

Health care payrolls : +13,500. (The sole bright spot among private sector industries was health care, which tends to be more labor intensive than manufacturing and other services)

The government shed 5,000 jobs last month due to cutbacks in state and local payrolls.