Published: March 7, 2008
The economy shed 63,000 jobs in February, the government said on
Friday, the fastest falloff in five years and the strongest evidence
yet that the nation is headed toward -- or may already be in -- a
recession.
Manufacturers and construction companies, reeling from the worst
housing slump in decades, led the declines in payrolls. But the losses
were spread across a broad range of businesses -- including department
stores, offices and retail outlets -- putting increased pressure on
consumers' pocketbooks.
The unexpected decline raised anticipation on Wall Street that the
Federal Reserve will lower interest rates again later this month,
perhaps by as much as a full percentage point, as the central bank
scrambles to stave off a steep economic slowdown.
"I haven't seen a job re****t this recessionary since the last
recession," said Jared Bernstein, an economist at the Economic Policy
Institute in Wa****ngton. "This is a picture of a labor market becoming
clearly infected by the contagion from the rest of the economy."
Stock markets dropped after the opening bell, then recovered before
heading down again. At 1:45 p.m., the Dow Jones industrials were down
145.80 points, or 1.2 percent, at 11,894.59, and the Standard & Poor's
500-stock index had lost 1 percent, as Wall Street weighed the
economic news.
Before the jobs re****t was released, the Fed announced that it would
increase the amount of money it makes available to banks in a larger
effort to unlock a panic in the credit market. As part of the plan,
the Fed will release $100 billion in through a series of auctions
intended to make it easier for banks to borrow money from the
government.
But the focus on Friday was squarely on the jobs re****t, which
revealed widespread cracks in the nation's labor market.
The private sector lost 101,000 jobs last month, the biggest dropoff
in five years. Retail stores shed 34,000 jobs, while the manufacturing
sector lost 52,000 workers and construction firm payrolls shrank by
39,000 jobs.
The loss in February was the second consecutive monthly decline in the
labor market; economists had predicted a slight increase. The
government also revised down its estimate for January to a loss of
22,000 jobs -- the first decline in four years -- and cut in half its
estimate for job growth in December.
"One month you can dismiss," said Ethan Harris, chief United States
economist at Lehman Brothers. "Two months is a lot harder."
In an interview, Mr. Harris sounded discouraged, a feeling shared by
the growing number of Americans who are out of a job. Fewer Americans
looked for work in February, and the size of the nation's overall
labor force declined.
Those developments sent the unemployment rate down to 4.8 percent last
month from 4.9 percent in January. "Had the 450,000 people who left
the labor force last month been counted among the unemployed, the
jobless rate would have been 5.1 percent instead of 4.8 percent," said
Mr. Bernstein of the Economic Policy Institute.
Wages stayed stagnant in February, further depressing the outlook for
consumer spending over the next few months. Among rank-and-file
workers -- more than 80 percent of the work force -- average pay grew
just 0.3 percent to $17.20 an hour. Wages are effectively running flat
when adjusted for inflation.
The White House took immediate steps to impose a measure of calm in
the aftermath of the dismal re****t, announcing that President Bush
would make a statement about the economy soon after 2 p.m. at the
White House. Meanwhile, the White House released a "fact sheet"
asserting that the economy remains "structurally sound for the long
term," even though growth has slowed.
Despite the latest re****t, the White House insisted that, over all,
job growth has been encouraging in recent months. "Our economy has
added about 860,000 jobs over the last 12 months -- an average of
72,000 jobs per month -- and more than 8.1 million since August 2003,"
the White House said.
The White House pointed to recent steps to aid "responsible
homeowners," as opposed to irresponsible speculators, with their
mortgages, and it called on Congress again to modernize the Federal
Housing Administration to help out even more people.
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