As if we needed another reminder of how bad things are, the US government released its latest unemployment figures on Friday.

The bureau of labour statistics reports unemployment currently at 8.1%, the highest level in 15 years. This puts the total number of unemployed Americans at 12.5 million. Over four million jobs have been lost since the recession began a year ago. More than half of those disappeared in the last four months alone – pointing to an acceleration of job loss as the recession deepens.

The problem with unemployment figures is they don't tell the full story. Unemployment, by definition, only counts those who are actively looking for work but cannot find it. Once you have simply given up, perhaps due to six months of steady rejections and hiring freezes, you are no longer unemployed. Rather, you are considered a "discouraged worker" and not counted as part of the labour force, along with children and retirees. If discouraged workers were to be factored in, the total jobless rate would be 14.8%, the highest level on record since the labour department began keeping tallies.

As any recession wears on, fewer jobs become available and more job seekers become discouraged. Therefore the longer this recession lasts, the less reliable a barometer the unemployment rate will be, and the more it will understate the severity of the crisis.

Also hidden in unemployment figures is the number of workers who are underemployed. Technically, you could have worked just one hour in the past week and still be considered employed. The ranks of "involuntary part-time" workers are growing, as some employees avoid the axe by allowing their hours to be cut. The average work week is now down to 33 hours. Besides the obvious negative effect on family income, workers who are shifted from full-time to part-time work usually lose their health benefits. In this country, a job crisis is by necessity also a public health crisis.

Another depressing metric is mass layoffs. Economists distinguish between different types of unemployment: frictional (when workers move from one job to another), structural (when labour markets are unable to clear) and cyclical (when the entire economy tanks) – the type that's of interest to us now. When companies are firing hundreds of workers at a time, that is not a sign of the relatively more benign types of unemployment. Since the beginning of the recession, 2.6 million workers were laid off in 25,712 mass "events". These were concentrated in manufacturing, especially in the south and midwest. Mass layoffs are more pernicious because they speak to the collapse of entire industries and, in towns and cities dependent on a single industry, the demise of entire communities.

The extent of job loss throughout the economy illustrates the recession's spread from its roots in the mortgage-backed securities crash. Predictably, financial services, real estate and construction were hit the hardest, as well as the long-suffering manufacturing sector. But job losses have also been pronounced in retail, transportation, hospitality and the information sector. Only healthcare has weathered the crisis, for now at least. People will always get sick. But as they lose health coverage along with their jobs, there will be fewer patients able to pay for treatment.

Price indices give further indication that things will get worse before they get better. Unemployment is normally associated with inflation. But today's crisis is marked by precisely the opposite: job loss accompanied by deflation. What sounds like a good thing – who doesn't like paying less for gas? – is actually quite chilling. As commodity prices continue to fall, consumers hoard their money, anticipating that prices for that new TV will be even lower next month. Less consumer spending means less demand, more layoffs and a continuing spiral of falling prices.

Deflationary crises are rare – they haven't been seen in this country since the Great Depression – and are notoriously difficult to counter. The Federal Reserve has already exhausted its ammunition by cutting the federal funds rate effectively to zero. Japan is one of the few countries to have dealt with deflationary unemployment in recent history, after an eerily similar housing bubble burst. They too responded by slashing interest rates to zero. In the end, it took Japan an entire "lost decade" to crawl out – a legacy that does not bode well for us.

What can be done? Also on Friday, the labour department – hoping to temper the bad news – announced it would make $3.5bn available to states for job training programmes. Training funds are key to addressing frictional and structural unemployment. But as demand for labour falls across sectors, there will be fewer "safe" industries (typically healthcare) for workers to train into.

What remains to be seen is whether stimulus spending will have the desired long-term impact on demand and, in turn, job growth. If it does not, we will see if this administration has the will to take more drastic measures – something that Japan did after years of joblessness and moribund growth. After all, in 2003, it nationalised the banks.