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Recession fears rise on more job cuts
Fri Mar 7, 2008 7:35pm EST

By Glenn Somerville

WASHINGTON (Reuters) - Employers unexpectedly cut jobs in February at
the steepest rate in nearly five years, a second straight month of
employment losses that heightened fears the world's largest economy has
skidded into recession.

"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.

The Labor Department on Friday said 63,000 non-farm jobs were eliminated
on top of an upwardly revised loss of 22,000 in January, sharply
contrary to Wall Street economists' forecasts that 25,000 positions
would be added in February.

The department also halved the number added in December to 41,000 from
the 82,000 estimated a month ago, in a move that underlined the steady
deterioration in the U.S. labor market.

"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.

The U.S. central bank already has cut its federal funds target rate by
2.25 percentage points since September to its current 3 percent level
and is widely expected to slash it again at its next policy-setting
session on March 18.

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.

STOCK PRICES SUFFER

Stock prices dropped on the unfavorable jobs report, with the Dow Jones
industrial average down 146.70 points at the close to 11,893.69. The
Nasdaq Composite Index was off 8.01 points to end at 2,212.49.

U.S. Treasury debt prices were mixed. The benchmark 10-year note rose
10/32 in price for a yield of 3.56 percent, down from 3.59 percent late
Thursday.

Just before the employment report's release, the Fed said it was
increasing the size of special auctions it conducts twice a month to add
funds, or liquidity, into highly stressed capital markets. That should
make it easier for businesses to borrow money needed to expand and to
boost hiring.

President George W. Bush acknowledged an economic slowdown has begun but
said his administration deserved credit for administering a "booster
shot" in the form of a $152 billion economic stimulus program that
should kick in by summer.

"We believe that the steps we've taken, together with the actions taken
by the Federal Reserve, will have a positive effect on our economy,"
Bush said. Until now, the White House has maintained the economy was not
at risk of recession and still resists questions whether a contraction
is under way.

"Recessions are things that are declared by other people," White House
Economic Adviser Edward Lazear said, though he conceded the Bush
administration has "definitely downgraded" its forecast for
first-quarter economic performance.

The jobs report is one of the first gauges of overall U.S. economic
activity each month, and so the bleak February report sent a shock
through the global financial sector.

WORST SINCE 2003

The back-to-back January and February job losses were the first
consecutive monthly declines since May and June of 2003, shortly after
the start of the U.S.-led invasion of Iraq.

Labor Department officials said February's job losses were the largest
for any month since March 2003 when 212,000 jobs were cut.

Late on Friday, the Fed issued data showing consumers were still
borrowing heavily to spend in January. Consumer credit outstanding
climbed by $6.9 billion, nearly double December's $3.7 billion gain.

Many economists caution that the next wave of defaults on borrowing is
likely to occur in consumer loans like those taken out to buy cars and
to keep up credit-card payments.

During February, the U.S. unemployment rate eased to 4.8 percent from
4.9 percent in January, but that was because fewer people were in the
labor force. The department said the number of people in the workforce
fell by 450,000 in February, likely a sign that many people have given
up trying to find a job.

Job losses were widespread. Some 52,000 jobs were lost at factories, the
largest decline since July 2003 when 92,000 jobs were cut. Construction
businesses eliminated another 39,000 on top of 25,000 cut in January, a
reflection of the housing industry's deepening woes.

The department said that since the housing boom peaked in September
2006, construction businesses have cut 331,000 jobs.

Retailers also shed jobs last month, dropping 34,000 people off their
payrolls, a possible reflection of concern that hard-pressed consumers
are likely to begin pulling back sharply on spending.

In a statement issued with the data, Bureau of Labor Statistics
Commissioner Keith Hall warned that many of this year's job losses may
take a long time to come back.

(Reporting by Glenn Somerville; Editing by Neil Stempleman)

The only time you aren't lying is when you cut and paste......- Hide quoted text -

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No, most of his cut and paste is lies.. That's why no one reads them...