Job losses: Worst in 5 years
Payrolls sink in February, fueling recession anxiety. Unemployment rate
declines, but that's because there are fewer people in the workforce.
By Chris Isidore, CNNMoney.com senior writer
Last Updated: March 7, 2008: 12:09 PM EST
NEW YORK (CNNMoney.com) -- Employers made their deepest cut in staffing in
almost five yearsin February, the Labor Department re****ted Friday.
There was a net loss of 63,000 jobs, which is the biggest decline since
March
2003 and weaker than the revised 22,000 jobs lost in January. Economists
had
forecast a gain of 25,000 jobs.
The weak re****t fueled already mounting recession fears and is likely to
keep
the Federal Reserve cutting interest rates further when it meets later
this
month.
"Based on today's Employment Re****t, if we are not in a recession, it is a
darned good imitation of one," said Kevin Giddis, managing director of
fixed
income at Morgan Keegan. "We are in an unprecedented real estate and
credit
crisis that is whipping its way through the U.S. economy like a Midwestern
tornado."
Job losses were widespread, reaching beyond the battered construction
sector,
which lost 39,000, and manufacturing, where job losses hit 52,000.
Retailers cut 34,000 jobs.
Tem****ary staffing firms cut nearly 28,000 from their payrolls, another
warning
sign of employers pulling back.
Hotels cut about 4,000 jobs, a sign that discretionary consumer spending
could
be on the wane.
Overall the private sector cut 101,000 jobs, with only a gain in
government
employment limiting losses.
"Job growth appears to have weakened across nearly every industry with the
exception of health care and government," said Keith Hall, the
commissioner of
the Bureau of Labor Statistics, which prepares the jobs re****t, testified
Friday
before a congressional committee.
Hall would not give a forecast for hiring going forward, but other said
the
latest re****t suggests more job losses likely lay ahead.
"Businesses have become too pessimistic about the outlook for the economy,
and
the capacity of the Bush Administration and Federal Reserve to manage it,
to be
adding new employees or replacing those that leave," said University of
Maryland
professor Peter Morici.
Underlying weakness
Despite the loss, the unemployment rate improved to 4.8% from the 4.9%
reading
in January. Economists had forecast the unemployment rate would rise to
5%. A
survey of households is used to estimate the unemployment rate, while a
survey
of employers that is considered to be more accurate sets the readings on
the
changes in payrolls.
The unemployment rate fell because of an increase of 450,000 people whom
the
government no longer counts as being part of the labor force for a variety
of
factors, such as that they are not currently looking for work. That drop
in the
size of the labor force allowed for he modest decline in unemployment,
even as
the household survey showed 255,000 fewer Americans with jobs than in
January.
Hall conceded in his testimony Friday that the labor market was weaker
than
suggested by the decline in the unemployment rate. He pointing to an
increase of
637,000 workers over the past 12 months who have part-time jobs but would
prefer
to be working full time.
He said the bureau's broadest measure of the unemployment rate, one which
counts
as unemployed both those part-time workers who want full-time jobs as well
as
those not searching for a job at the moment but who are interested in
finding
work, now stands at 8.9%, up from 8.1% a year ago.
"We've clearly had a broad weakening in the labor market," Hall testified.
"This
weakening in the labor market is not a sudden thing, it has been happening
for
over a year."
Rep. Elijah ***mings, who was chairing the hearing of Joint Economic
Committee,
suggested that Congress needed to do more to address the problems of
unemployment. Some proposals: extended unemployment benefits and increased
food
stamps, as well as greater investment in infrastructure.
"Frankly I believe our economy stands poised on an uncertain cliff,
threatening
to throw our nation into a crisis," said ***mings. "We do not need to
recite a
litany of data to know our economy is struggling."
The rising fear of recession has sparked a series of interest rate cuts
from the
Federal Reserve, along with a $170 billion economic stimulus package
passed last
month by Congress.
The Fed is set to meet March 18 to decide what to do with interest rates.
Friday's re****t would seem to suggest more rate cuts are on the way,
despite the
improved unemployment rate.
"Even the silver lining of a falling unemployment rate has a little rust,"
said
Rich Yamarone, director of economic research at Argus Research. He
predicted
that the central bank will cut rates by a half percentage point at both
its
March meeting and again on April 30.
But Yamarone and some other experts questioned whether additional Fed cuts
would
do much to improve the employment outlook.
"We're not in a crisis people cost of borrowing is too high, it's because
people
are afraid of lending," said Dan Alpert, managing director of Westwood
Capital,
referring to the ongoing credit crunch. "At the end of the day, the Fed
cuts
don't really solve the problems. They've already cut allot; if jobs
continue to
decline in face of further interest rate cuts, it's prime facia evidence
cuts
aren't effective."
But few experts were ready to suggest the Fed would stop cutting rates at
this
point, given the problems in the economy and financial markets.
"The Fed has to do what it can to provide remedy and not scare the market
as
well," said Mike Materasso, a senior ****tfolio manager at Franklin
Templeto
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