Politics & Government

Jobs down 3rd straight month; recession looms

WASHINGTON — The Federal Reserve is likely to lower interest rates again later this month after a report from the Labor Department on Friday showed that the nation's employers shed 80,000 jobs in March, heightening recession fears.

The report marked the third straight month of job losses, and the Bureau of Labor Statistics also issued revised and more discouraging estimates for job losses in January and February. Employers shed 76,000 jobs in each of those months, not the 17,000 and 63,000 reported initially.

The nation's unemployment rate rose sharply in March, rising by three-tenths of a percentage point to 5.1 percent. It's still low by historical standards, but the highest rate since the aftermath of Hurricanes Katrina and Rita in September 2005.

"While these numbers are disappointing, they are not entirely unexpected," the White House said in a memo on the economy. "We have been anticipating that the early part of 2008 will be the weakest part of the year."

Job losses alone don't mean recession, but many other indicators also point to a significant economic slowdown.

"Employment declines are consistent with personal income and production losses. Unemployment is up to 5.1 percent. Total hours worked declined, consistent with recession," said an analysis by John Silvia, chief economist for Wachovia, the large national bank based in Charlotte, N.C.

Evidence of contraction will allow the Fed to cut interest rates further when it meets April 29-30, Silvia said. He estimated current economic growth at "near zero at best."

"The Fed has the go-ahead to ease," Silvia wrote.

Fed Chairman Ben Bernanke warned Wednesday that "a recession is possible" for the U.S. economy.

Investors shrugged off the jobs report Friday. The Dow Jones Industrial Average closed down by only 16.61 points to 12,609.42. The S&P 500 rose slightly despite the jobs report, up 1.09 points to 1370.40. The Nasdaq finished the day advancing 7.68 points to close at 2370.98.

The dismal jobs report renewed political debate over efforts to spark the economy.

Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee, said in a statement that "we must start work on expanding the stimulus package enacted earlier this year — beginning with an extension of unemployment benefits and assistance to cities and states."

Labor leader John Sweeney, who heads the AFL-CIO, issued a statement calling for new public-works projects.

"This country has miles of crumbling roads to repair, and thousands of schools, bridges and other infrastructure needs to attend to. It's time to put America to work," he said.

Since last September, the Fed has cut its benchmark federal funds rate — the rate that banks charge each other for overnight lending — by 3 percentage points to 2.25 percent in a bid to spur the economy. Commercial banks have lowered their prime rate, which they charge their best customers, in lockstep with the Fed.

Although interest rates are now relatively low, economist Nigel Gault of Global Insight, a forecaster in Lexington, Mass., argues that they'll go lower because "growing evidence of economic contraction will induce the Fed to take out further insurance against a downward spiral."

In a forecast released Friday, Gault expected the Fed to lower its benchmark rate to 1.5 percent by midyear. That would bring the prime rate charged to consumers down to 4.5 percent.

The winners and losers in the March jobs report were the same as the past two months: most private-sector job losses have come in construction, real estate and finance — industries at the center of today's economic slump. Since its peak in September 2006, the construction sector has shed 394,000 jobs, the Labor Department said.

Manufacturing employment fell by 48,000 jobs in March, and by 310,000 over the past 12 months. Retailers held employment steady in March, the agency said, but over the past 12 months have trimmed 107,000 jobs.

The chief economist for the National Federation of Independent Business, which represents small businesses, released his own survey Friday. It found that only 3 percent of his members expect to create new jobs, about the same as during the 1990-91 economic downturn.

"This means even weaker demand for labor in the coming months, supporting a rise in the unemployment rate," William Dunkelberg said. "The need for more workers is diminished by the growing concerns about the economy, fueled by the media and seconded by the Fed."

The health-care sector remains one of the few bright spots, adding 23,000 jobs in March and 363,000 positions over the past 12 months. The food service sector also added 23,000 jobs in March, and 288,000 positions year over year.

ON THE WEB

The Bureau of Labor Statistics report.

The BLS commissioner's statement.

  Comments