U.S. economy losses 63,000 jobs in February
NEW YORK: The U.S. economy shed 63,000 jobs in February, the government said Friday, the fastest falloff in five years and the strongest evidence yet that the country is headed toward - or may already be in - a recession.
The unexpected decline raised expectations that the Federal Reserve would lower U.S. interest rates again this month, perhaps by as much as a full percentage point, as the central bank attempted to stave off a steep economic slowdown. The European Central Bank on Thursday left interest rates unchanged despite signs that Europe was feeling some effects of the U.S. economic slowing, a decision that at one point drove the euro above $1.54 to the continually-weakening dollar.
"I haven't seen a job report this recessionary since the last recession," said Jared Bernstein, an economist at the Economic Policy Institute in Washington. "This is a picture of a labor market becoming clearly infected by the contagion from the rest of the economy."
Major U.S. stock indexes slid, with the Dow Jones industrial average falling below 12,000. The blue-chip indicator was at 11,868.70 in afternoon trading, down 16 percent from its closing record of 14,164.53 set last Oct. 9.
The fresh evidence of a sharply-slowing economy came as credit markets tightened further amid renewed nervousness among banks to lend money. That prompted the Fed to announce it would increase the amount of money it made available to banks. As part of the plan, the Fed will release $100 billion through a series of auctions intended to make it easier for banks to borrow money from the government.
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President George W. Bush said the U.S. economy would pick up as measures that the Congress has adopted to stimulate growth took effect.
"It's clear our economy has slowed," Bush said. "I know Americans are concerned about our economy. So am I."
The economic stimulus "is starting to have an impact," and "together with the steps taken by the Federal Reserve will have a positive effect on our economy," he said at the White House.
Earlier Friday, Edward Lazear, the president's top economic adviser, said that U.S. economic growth could contract for the current quarter, an assessment that tracks with many outside experts but is the most pessimistic to come so far from the White House.
"We don't really know whether it will be negative or not," he said. "We have definitely downgraded our forecast for this quarter."
The White House also released a "fact sheet" asserting that the economy remained "structurally sound for the long term," even though growth had slowed.
Yet the jobs report revealed widespread cracks in the nation's labor market. 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 job 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 U.S. economist at Lehman Brothers. "Two months is a lot harder." During an interview, 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," Bernstein, of the Economic Policy Institute, said.
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 Fed has signaled it will focus on stimulating growth when it meets on March 18, and the weak jobs report raised expectations among investors that the central bank would continue cutting interest rates. Futures markets have begun to price in a full percentage point cut, though the majority of investors who bet on the Fed's actions think the central bank will lower rates by three-quarters of a point, to 2.25 percent.