Unemployment is a symptom, not a cause.  We are "over-stored" and suffer from an abundance of goods (relative to true wealth rather than borrowing capacity).  Unfortunately, it is a symptom that feeds into a negative feedback loop.  The higher it gets, the worse the credit situation becomes.  In the chart below, you can see that this is clearly becoming the worst labor market in generations.  To answer the question in the bottom panel, we are a maturing economy.  The "good times" didn't lead to high employment growth, and the "bad times" are leading to off-the-charts reductions:

The worst part is that we continue to see the duration of unemployment extend:

It's going to get worse.  Employers are trying to retain workers by chopping wages and hours.  I will be surprised if the average wage doesn't decline year-over-year at some point in 2010.  Employers were reticent to fire in most of 2008 and certainly recognized the high inflation in prices their employees faced then.  Neither of these is the case at this point, as inflation is plunging and employers aren't shy about slashing payrolls.  As a generalist who follows many companies from varying sectors, it is clear to me that head-count reduction is the rule not the exception:

So, the tick up in unemployment and in negative payroll growth along with the cut in hours worked and the flattening in overall wages not surprisingly roiled the market.