U.S. economy lost 63,000 jobs in February
The economy shed 63,000 jobs in February, the government said 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 would lower interest rates again 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 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.”
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“The question appears no longer to be are we going into a recession but how long and deep it will be,” said economist Joel Naroff of Naroff Economic Advisors Inc in Holland, Pennsylvania.
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“The underlying trends are horrible, with worse to come,” said economist Ian Shepherdson of High Frequency Economics in Valhalla, New York. The Federal Reserve “has to ease (U.S. benchmark interest rates) much more,” he said.
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A Reuters poll on Friday found that most major Wall Street dealers expect the fed funds rate to be at 2 percent and possibly lower by the end of April.
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Meanwhile the Fed appears to have tried to soften the blow by announcing two initiatives to increase liquidity during the coming month. Two additional auctions will be conducted under the Term Auction Facility, each of $50 billion (up from $30 billion in the February auctions). The Fed said it intends to continue the TAF for at least six months. Second, the Fed will initiate $100 billion in 28-day repurchase agreements with primary dealers in government debt. The measures are intended to improve liquidity in the market, especially to reduce the risk premium on longer-term (more than overnight) trades.
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Sources
- International Herald Tribune, Mar. 7, 2008
- Reuters, Mar. 8, 2008
- BusinessWeek, Mar. 7, 2008