United States 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 Advisers in Holland, Pennsylvania.
The Labour 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 US labour 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 [US benchmark interest rates] much more,” he said.
The US central bank has already cut its federal funds target rate by 2,25 percentage points since September to its current 3% level and is widely expected to slash it again at its next policy-setting session on March 18.
President George 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 US 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 US-led invasion of Iraq.
Labour 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. — Reuters