Employers shed 63,000 jobs in February, many more than analysts
had expected, according to a Labor Department report Friday, making
it the second consecutive month of employment losses and upping the
probability that the economy is already in a recession.
Kevin G. Hall – McClatchy Newspapers
WASHINGTON
Employers shed 63,000 jobs in February, many more than analysts had expected, according to a Labor Department report Friday, making it the second consecutive month of employment losses and upping the probability that the economy is already in a recession.
On the dour news, stocks opened down more than 130 points on the Dow Jones Industrial Average, but soon rebounded. Just minutes before the Bureau of Labor Statistics report was released, the Federal Reserve said it was making $100 billion available through a new auction mechanism to help keep credit markets functioning.
The consensus among mainstream economists was for sluggish employment that still would create about 25,000 jobs. Instead, not only were Friday’s numbers down sharply but government statisticians also revised January’s negative job numbers downward. Employers cut 22,000 jobs, not the 17,000 first reported.
“Sure looks like a recession, with exports remaining the only bright spot in the U.S. economy,” John Silvia, chief economist for Charlotte, N.C.-based Wachovia, said in a note to investors.
Nigel Gault, chief U.S. economist for forecaster Global Insight in Lexington, Mass., was blunter.
“The debate should no longer be about whether there is or is not a recession, only about how deep it will be,” he told investors. “Private employment has now fallen for three months in a row, according to today’s new data, with the steepest decline in February.”
Economists aren’t alone in their recession fears. Billionaire investor Warren Buffet, considered the richest man in the world, said Monday that he thought that the U.S. economy already was in what would be a short recession.
The dismal jobs report makes it more likely that the Federal Reserve will slash interest rates again, in an effort to spark the economy, when it meets March 18.
“The Fed has the go-ahead to ease again,” Wachovia’s Silvia said.
Wall Street, through the futures market, is expecting a three-quarters of a percentage point cut, which would bring the benchmark federal funds rate to 2.25 percent. Banks would follow suit by lowering the prime rate to 5.25 percent.
The job losses aren’t of the magnitude associated with deep economic turndowns, which usually are in the hundreds of thousands. But job losses in consecutive months usually happen during recessions and seldom outside of them. The last such consecutive months of falling employment were in 2003, when the economy wasn’t in recession.
Jobs are considered a lagging indicator, providing a snapshot of past business activity. And since recessions aren’t called until the economy has been in one for months, these lagging indicators already point to a drastically slowing economy. Economic growth fell to just 0.6 percent in the last three months of 2007 and appears likely to be negative for the first quarter of this year.
The Bush administration has said repeatedly that the nation isn’t in a recession, just a period of slow growth that will pick up when a stimulus plan that Congress passed last month begins to show its benefits in late spring.
Two consecutive months of weak employment may force the administration to take additional steps and perhaps try more aggressively to push banks into modifying problem loans to prevent foreclosures. The Mortgage Bankers Association on Thursday reported record percentages for new foreclosures and the percentage of all homes in foreclosure.
The problems in housing have captured headlines, but until late last year the broader economy was in strong shape. Deepening problems in financial markets, however, have dried up lending for businesses and consumers.
And consumers have pulled back as they’ve seen their wealth fall while the stock market and home prices drop like stones. The RBC Cash Index, a survey of consumer attitudes and spending by household, fell to 33.1 percent in its March reading, announced Friday. That’s the lowest since the index was created in 2002.
Friday’s jobs report gives a snapshot of which sectors of the economy are struggling. Private-sector employment fell by 101,000 jobs, and the overall picture would have been far worse if not for robust hiring by federal, state and local governments.
Manufacturing led the employment losers, shedding 52,000 jobs in February and almost 300,000 jobs over the past 12 months. Construction employment fell by 39,000 posts and retail employment dipped by 34,000 positions.
For industries that were hiring, government employment was up by 38,000 jobs, the health-care industry added 36,000 posts and the leisure and travel sector added 21,000 payroll jobs.
The nation’s unemployment rate dipped a tenth of a percent to 4.8 percent as more workers exited the economy. It’s measured independently of the employment report.
Given the consecutive months of employment losses, most mainstream economists expect the unemployment rate to rise steadily to as high as 5.5 percent before year’s end.
In separate news Friday, the Federal Reserve announced that it would make $100 billion in short-term loans available through two auctions this month. This Trade Auction Facility is a new creation by the Fed that allows banks to bid on short-term loans that have low interest rates. The Fed had been offering $60 billion a month but has upped that to $100 billion to keep banks offering short-term credit to corporations.
