Full Version: Job losses: Worst in 5 years

Job losses: Worst in 5 years

Payrolls sink in February, fueling recessionanxiety. Unemployment rate declines, but that's because there are fewerpeople in the workforce.
NEW YORK (CNNMoney.com) -- Employers made their deepest cut in staffing in almost five yearsin February, the Labor Department reported Friday.
Therewas a net loss of 63,000 jobs, which is the biggest decline since March2003 and weaker than the revised 22,000 jobs lost in January.Economists had forecast a gain of 25,000 jobs.
The weak reportfueled already mounting recession fears and is likely to keep theFederal Reserve cutting interest rates further when it meets later thismonth.
"Based on today's Employment Report, if we are not in arecession, it is a darned good imitation of one," said Kevin Giddis,managing director of fixed income at Morgan Keegan. "We are in anunprecedented real estate and credit crisis that is whipping its waythrough the U.S. economy like a Midwestern tornado."
Job losseswere widespread, reaching beyond the battered construction sector,which lost 39,000, and manufacturing, where job losses hit 52,000.
Retailers cut 34,000 jobs.
Temporary 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.
"Jobgrowth appears to have weakened across nearly every industry with theexception of health care and government," said Keith Hall, thecommissioner of the Bureau of Labor Statistics, which prepares the jobsreport, testified Friday before a congressional committee.
Hall would not give a forecast for hiring, but others said the latest report suggests more job losses likely lay ahead.
"Businesseshave become too pessimistic about the outlook for the economy, and thecapacity of the Bush Administration and Federal Reserve to manage it,to be adding new employees or replacing those that leave," saidUniversity of Maryland professor Peter Morici.
Underlying weakness
Despitethe loss, the unemployment rate improved to 4.8% from the 4.9% readingin January. Economists had forecast the unemployment rate would rise to5%. A survey of households is used to estimate the unemployment rate,while a survey of employers that is considered to be more accurate setsthe readings on the changes in payrolls.
The unemployment ratefell because of an increase of 450,000 people whom the government nolonger counts as being part of the labor force for a variety offactors, such as that they are not currently looking for work. Thatdrop in the size of the labor force allowed for he modest decline inunemployment, even as the household survey showed 255,000 fewerAmericans with jobs than in January.
Hall conceded in histestimony Friday that the labor market was weaker than suggested by thedecline in the unemployment rate. He pointing to an increase of 637,000workers over the past 12 months who have part-time jobs but wouldprefer to be working full time.
He said the bureau's broadestmeasure of the unemployment rate, one which counts as unemployed boththose part-time workers who want full-time jobs as well as those notsearching for a job at the moment but who are interested in findingwork, now stands at 8.9%, up from 8.1% a year ago.
"We've clearlyhad a broad weakening in the labor market," Hall testified. "Thisweakening in the labor market is not a sudden thing, it has beenhappening for over a year."
Rep. Elijah Cummings, who waschairing the hearing of Joint Economic Committee, suggested thatCongress needed to do more to address the problems of unemployment.Some proposals: extended unemployment benefits and increased foodstamps, as well as greater investment in infrastructure.
"FranklyI believe our economy stands poised on an uncertain cliff, threateningto throw our nation into a crisis," said Cummings. "We do not need torecite a litany of data to know our economy is struggling."
Forecasting the Fed
Therising fear of recession has sparked a series of interest rate cutsfrom the Federal Reserve, along with a $170 billion economic stimuluspackage passed last month by Congress.
The Fed is set to meetMarch 18 to decide what to do with interest rates. Friday's reportwould seem to suggest more rate cuts are on the way, despite theimproved unemployment rate.
"Even the silver lining of a fallingunemployment rate has a little rust," said Rich Yamarone, director ofeconomic research at Argus Research. He predicted that the central bankwill cut rates by a half percentage point at both its March meeting andagain on April 30.
But Yamarone and some other experts questioned whether additional Fed cuts would do much to improve the employment outlook.
"We'renot in a crisis because the cost of borrowing is too high, it's becausepeople are afraid of lending," said Dan Alpert, managing director ofWestwood Capital, referring to the ongoing credit crunch. "At the endof the day, the Fed cuts don't really solve the problems. They'vealready cut allot; if jobs continue to decline in face of furtherinterest rate cuts, it's [i]prima facie[/i] evidence cuts aren't effective."
Butfew experts were ready to suggest the Fed would stop cutting rates atthis point, given the problems in the economy and financial markets.
"TheFed has to do what it can to provide remedy and not scare the market aswell," said Mike Materasso, a senior portfolio manager at FranklinTempleton.