Payroll figures show an economy tumbling
The Labor Department numbers released Friday were far worse than economists had forecast. There is widening agreement that the first recession since 2001 has arrived.
The Washington Post
WASHINGTON -- The jobless rate increased to 5.1 percent and employers eliminated 80,000 more jobs in March, the deepest monthly net job loss in five years and strong evidence that distress in housing and financial markets has spread to a labor market -- and broader economy -- in deeper trouble.
The Labor Department numbers released Friday were far worse than economists had forecast. The unemployment rate rose from 4.8 percent in February and 4.4 percent in March 2007.
The reduced payroll in March was the third straight month of decline. The department also revised each of the previous two months' employment levels downward by another 67,000 positions, for a total of nearly a quarter-million jobs eliminated in the first quarter of 2008.
"We're in recession," said David Wyss, chief economist of Standard & Poor's. "It's hard to conclude anything else."
There is widening agreement that the first recession since 2001 has arrived. Even Ben Bernanke, in a rare public utterance for a Federal Reserve chairman, used the "R" word, acknowledging for the first time this week that a recession was possible.
Under one rule of thumb, six straight months of a shrinking economy would constitute a recession. Because of statistical limitations, a recession can't be formally identified until months after one takes hold.
Among the housing market's troubles, the turmoil hampering the credit markets and the manufacturing sector's continuing decline, bad financial news has continued to accumulate, and the number of economists still on the fence is dwindling.
While unemployment remains low by historical standards, job-seekers and firms that help place workers said employers are far more reluctant to hire as they've become wary of the soft economy.
"If you're working, you might not think there is a recession," said Ruby Gilmore, who was laid off from her job as a human-resources employee in January and is looking for work. "But looking for a job, things are very competitive. ... It is like they are looking for a reason not to hire you."
Markets don't flinch
Investors shrugged off the jobs report Friday. The Dow Jones Industrial Average closed down by only 16.61 points to 12,609.42.
Certainly, Wall Street's worries haven't evaporated. What has changed is the way investors are looking at the market -- simply, that stocks are more likely to go up than continue their precipitous declines.
"Sentiment is the whole story, and what we're seeing is an improvement in sentiment," said Alfred Goldman, chief market strategist at Wachovia Securities.
An education helps
The pain among job-seekers is worst among people with little education. The seasonally adjusted joblessness rate for people with less than a high-school diploma rose to 8.2 percent, from 7.3 percent in February. Unemployment was unchanged, at 2.1 percent, for those with a bachelor's degree or higher.
The number of construction jobs, which has been falling steadily for 18 months, continued its rout. That sector has shed 51,000 positions as fewer homes are being built.
Fewer houses mean less construction and building materials; the number of manufacturing jobs also fell 48,000, with some of the steepest losses among makers of lumber, drywall and other materials. Automakers also cut jobs.
Consumers spend less
With their homes less valuable, Americans seem to be spending less, which means stores need fewer workers.
The number of retail jobs fell 12,400, with the steepest losses in sellers of building materials and appliances, which are strongly tied to the housing business.
Financial firms also cut 5,000 jobs, with the biggest losses in "credit-intermediation" companies, which includes banks and mortgage brokers.
This has caused even businesses that have little to do with housing to become less confident. Professional and business-services jobs, a sector that had been keeping the economy afloat, also trimmed 35,000 jobs.
"That's what's perhaps most disturbing of all," said Dana Johnson, chief economist of Comerica Bank. "Professional and business services had been a considerable source of strength."
The steepest service-sector losses were in employment services. When employers want to cut back, they are often more inclined to trim temporary employees than permanent staff, so the sector tends to be a leading indicator.
"The first thing people do is cut back on temporary staff," said Paul Villella, chief executive of HireStrategy, an employment-services firm. "Then, if things get really bad, they cut into their core staff and do layoffs."
So far in this downturn, there have been relatively few layoffs; instead, employers have held off on hiring and let empty positions stay that way. But that may be changing. Last week, the number of new claims for unemployment insurance rose to its highest level since Hurricane Katrina.
A bit of good news
There were some bright spots in the Labor Department report. Wages are climbing at a reasonable pace, with average hourly earnings up 0.3 percent, or 5 cents, in March from the previous month. Coupled with workers clocking slightly more hours, nonmanagerial workers saw their pay rise 0.5 percent.
A few sectors continued to add jobs, notably education and health services, with 42,000 new net positions, and leisure and hospitality, which added 18,000.
More stimulus plans?
The dismal jobs report renewed talk of economic stimulus. House Speaker Nancy Pelosi, D-Calif., said she would propose a second such package. Hers would supplement the $150 billion in tax rebates to be mailed to millions of Americans beginning in May.
In separate statements Friday, Democratic presidential rivals Sens. Hillary Rodham Clinton and Barack Obama supported another stimulus package and an extension of unemployment benefits, among other measures. In contrast, Republican Sen. John McCain said lower taxes and less regulation would generate jobs.
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," he said. "It's time to put America to work."
Material from The New York Times, the Chicago Tribune and McClatchy Newspapers is included in this report.
Copyright © 2008 The Seattle Times Company
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