By Don Miller

The worst recession since the Great Depression has already eliminated 7.2 million jobs, and analysts figure 750,000 more jobs could disappear over the next six months. That means the administration of U.S. President Barack Obama may be forced to employ a second stimulus if it wants to preserve the fledgling recovery that has carried the Dow Jones Industrial Average back above 10,000.

The U.S. unemployment rate officially hit 28-year high of 9.8% in September, according to the Labor Department.  But that number grows to 16.8% when you add the number of  “total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers,” also known as the “underemployment” rate.

When 16.8% of the workforce is unemployed or underemployed, any growth in gross domestic product (GDP) is likely to be severely constrained.  And in this case, a protracted jobless recovery promises to extend the housing and banking crisis, put a damper on wages, and further reduce consumption, which is the traditional path to a sustained economic recovery.

“This recovery looks like road kill, “Christopher Rupkey, economist at The Bank of Tokyo-Mitsubishi UFJ Ltd. told The Associated Press. “The heavy layoffs have stopped, but there are simply no new jobs available, and the harder the jobs are to get, the harder and longer this road to recovery is going to be.”

In July – the last month the government released statistics – there were more than six officially unemployed persons for every job opening.  Historically the ratio is closer to 2-1.

The job market always tends to lag the broader economy’s recovery. But after a recession of such severe magnitude, businesses are more reluctant to resume hiring.

“There’s extreme caution among businesses about managing the bottom line and not getting overextended,” Brian Bethune, the chief U.S. financial economist for IHS Global Insight Inc. told NPR. “There just isn’t enough confidence out there for them to think about raising employment levels.”

Meanwhile, productivity – or output per worker per hour worked – has continued to rise. That means businesses won’t necessarily feel compelled to hire new worker, despite improved economic conditions.

Will a Stagnate Consumer Lead to a Second Stimulus?

Already, evidence is mounting that U.S. consumers – the lifeblood of any recovery – are reacting to the surge in unemployment by pulling back from spending. Household purchases will grow at a 1% annual rate this quarter after rising at a 2.4% pace in the previous three months, according to the median forecast of 57 economists surveyed by Bloomberg News.

Consumer credit has dropped by a record $118.8 billion since peaking in July 2008, as Americans boosted savings and banks and credit-card companies restricted lending, Bloomberg reported.

And the National Retail Federation (NRF) said earlier this month that U.S. holiday sales for the last two months of the year will probably fall 1% from 2008.

“You just can’t see a lot of strength on the consumer side given how battered income is from job losses and weak hourly wage growth,” David Greenlaw, chief fixed-income economist at Morgan Stanley (NYSE: MS) told Bloomberg.

And if U.S. consumers can’t comeback on their own, the administration may be forced to consider additional measures to boost hiring to prevent the economic growth from backsliding.

President Obama’s $787 billion stimulus program promised to create 3.5 million jobs, but that’s not nearly enough to fill the need.

Most experts estimate that the economy must add approximately 3 million jobs over the next two years just to keep pace with population growth.  With 14.5 million officially unemployed Americans and 6.6 million people wanting to work but unable to find a job, the economy needs a total of 24.1 million jobs.

Meanwhile, 1.4 million people drawing unemployment will have their benefits dropped by the end of the year.  Behind them are 5.4 million more workers who’ve been unemployed for more than six months.

So far the president has rejected another multi-billion dollar stimulus bill. But Obama is considering a range of options, including an increase in transportation spending, prolonging unemployment benefits and a tax credit for first-time homebuyers.

In particular, the administration is hoping to extend such stimulus measures as the $8,000 tax credit for first-time homebuyers.

When it expires on Dec. 1, the homebuyers credit will be responsible for nearly 400,000 sales of new and existing homes, out of total sales of 1.4 million, Mark Zandi, chief economist at Moody’s Economy.com, told The New York Times. That’s roughly in line with estimates from the National Association of Realtors (NAR).

Zandi, who formerly advised U.S. Sen. John McCain, R-AZ, recommends extending the credit through August 2010. Legislators are also considering expanding the credit to include current homeowners.

The administration may also consider expanding the federal transportation funding program, which comes up for renewal every six years. That 2003 program expired on Sept. 30 and is currently operating under a 30-day extension period.

Obama is also expected to push for an extension of the “Making Work Pay” middle class tax cut that accounted for about a third of the February stimulus.

Extending these programs could cost the government tens of billions of taxpayer dollars.

For example, congressional analysts estimate the cost of the current homebuyer credit at about $1 billion a month. Expanding the credit through next August could cost as much as $30 billion, according to Moody’s Zandi.

That, in turn, could lead to another large run-up in the budget deficit, which in the last year was exacerbated by dwindling tax revenue. Individual income taxes, the biggest source of tax receipts, fell by 20%, and corporate income taxes dropped by 54%, according to the Congressional Budget Office (CBO).

The government ended its 2009 fiscal year in September with a total deficit of $1.4 trillion, the CBO said. That equates to 9.9% of U.S. GDP and is the largest deficit since 1945.

“There may not be anything we can do,” a Democratic Congressional leadership aide conceded to The Times. “Under any circumstances, it’s going to take a while for jobs to recover.”

But the question is: Will it take too much time?

Analysts put the odds of the United States dipping back into a recession in the next 12 months at 20%, according to Bloomberg. And there’s a one-in-five chance that the recovery will falter, along with the possibility that unemployment will hit 10.5% as the nation approaches midterm elections next year.

Rising unemployment “could be enough to push the economy back into recession,” Gus Faucher, director of macroeconomic research at Moody’s Economy.com, told Bloomberg. “There is going to be more stimulus. The economy needs some support until consumer spending kicks in.”