WASHINGTON (AFP) — US employers slashed payrolls by 63,000 jobs in February, the government said Friday in a sign of deeper woes for the world's biggest economy.
It was the second straight month of losses in nonfarm payrolls, seen as one of the best indicators of economic momentum. In January, revised data showed a loss of 22,000 positions, according to the Labor Department report.
February's loss was the biggest since March 2003, at the start of the war in Iraq, and a major disappointment for analysts expecting a gain of 25,000 jobs. For some, the report confirms the US is in recession.
"The payrolls report had recession written all over it," said Avery Shenfeld, senior economist at CIBC World Markets.
"It's nearly unheard of to see these numbers outside of recession."
The unemployment rate, which is based on a separate survey, fell to 4.8 percent from 4.9 percent a month earlier, the Labor Department said. This is attributed to people dropping out of the workforce, after being unable to find jobs, according to officials.
The labor force available for work fell by 450,000 and the participation rate slipped 0.2 percentage points.
The report was released moments after the Federal Reserve announced actions to pump more liquidity into the distressed banking system, which is reeling from a horrific slump in housing and curbing credit, in a further threat to economic growth.
Details in the payrolls report showed an economy quickly losing steam. Private sector payrolls were down by 101,000, in their third month of decline, including a loss of 52,000 jobs in manufacturing and 39,000 in construction.
The main gains were in government, which added 38,000 jobs.
The services sector added 26,000 jobs in February, the lowest since October 2005.
Overall, the report signaled a weaker-than-expected performance for the US economy, which according to analysts needs to add at least 100,000 jobs per month to keep pace with new labor market entrants.
"The weakness in housing is starting to catch up to the rest of the economy," said Shenfeld.
The US economy expanded at an anemic 0.6 percent pace in the fourth quarter of 2007 and many analysts say they expect the first quarter to show declining activity for the first time since the recession of 2001.
In a sign that inflation pressures remained present, the report said average hourly earnings rose 0.3 percent in February and 3.7 percent year-over-year.
The Federal Reserve has been cutting interest rates aggressively in the past six months in an effort to reignite growth in an economy battered by the worst housing market slump in decades and related troubles in the finance sector.
Just moments before the Labor Department announcement, the Fed unveiled two initiatives aimed at easing a growing credit squeeze that would make 200 billion dollars available to the strapped financial market.
The Fed said it was raising the amounts available in its Term Auction Facility program this month to a combined 100 billion dollars.
The Fed also said it was launching Friday a series of term repurchase transactions that are expected to reach 100 billion dollars to pump more liquidity into the banking system.
"This was a good news-bad news story," said Scott Brown, economist at Raymond James & Co. "It's good the Fed is coming to the rescue, the bad news is that they have to."
Brown said the main worry is that the economy may enter a downward spiral with "adverse feedback loops" where bad news feeds on itself and causes consumers and businesses to retrench further.
Still, a number of economists say the rate cuts by the Fed and a 168-billion-dollar stimulus package approved by Congress will help stabilize the economy by mid-year.
"The aggressive actions by the Fed will continue and the fiscal stimulus won't kick in for another few months, but those will help shorten the recession," said Shenfeld.
"We're looking for a first-half recession followed by a recovery in the third quarter."
Copyright © 2009 AFP. All rights reserved. More »
