By Kevin G. Hall
McClatchy Newspapers
Friday 07 March 2008
Washington - Recession fears mounted Friday after new data showed that employers shed 63,000 jobs in February and a private-sector index pointed to sagging consumer confidence amid sinking stocks and rising prices for oil and gasoline.
For the second consecutive month, employment was in negative territory, a trend most often associated with recession. The Bureau of Labor Statistics also issued a new count of how many non-farm payroll jobs were lost in January, boosting it from 17,000 to 22,000 positions.
The losses stood in stark contrast to the forecasts of most mainstream economists, who'd predicted an increase of about 25,000 jobs in February.
The steep job losses brought President Bush out for a statement in front of White House cameras. He signaled that he's aware of the fiscal hardships that Americans face and said that last month's economic stimulus package, including tax rebates to consumers, should improve the economy in coming months.
"I know this is a difficult time for our economy, but we recognized the problem early and provided the economy with a booster shot," the president said. "We will begin to see the impact over the coming months."
Afterward, a Treasury Department statement sought to talk up the economy. With oil hovering around $105 a barrel and the cost of wheat, corn and other commodities driving up food prices, the Treasury stressed that the core inflation rate remained contained at 2.5 percent.
It was an odd choice for positive news, since core inflation doesn't include the high prices in the volatile food and energy sectors. In effect, this measure of inflation ignores the record prices that Americans are paying at the gas pump and the grocery store. The latest reading of the consumer price index, which measures what Americans pay at the cash register, was almost double the core rate and stood at 4.3 percent for the12-month period that ended in January.
While Bush and the Treasury Department avoided using the "R" word - recession - the head of the president's Council of Economic Advisers left open that possibility.
"We are going to have a weak-growth quarter, and whether you call that a recession or not is something that we won't know for many months," Ed Lazear, the council's chairman, said at the White House.
Many economists disagreed.
"Sure looks like a recession, with exports remaining the only bright spot in the U.S. economy," John Silvia, chief economist for Charlotte, N.C.-based Wachovia, said in a note to investors.
Later, in announcing a conference call to revise their forecast, Wachovia's economic researchers wrote: "We now expect the U.S. has entered its first recession in seven years, as economic activity likely contracted in the first quarter."
Nigel Gault, chief U.S. economist for forecaster Global Insight in Lexington, Mass., was equally blunt.
"The debate should no longer be about whether there is or is not a recession, only about how deep it will be," he told investors. "Private employment has now fallen for three months in a row, according to today's new data, with the steepest decline in February."
Billionaire investor Warren Buffet, considered the richest man in the world, said Monday that the U.S. economy already was in what would be a short recession.
A textbook definition of recession is two consecutive quarters of negative economic growth. Recessions are dated after the fact by the National Bureau of Economic Research, which defines recession as a significant decline in economic activity spread across the economy and lasting over several months.
Friday's dismal jobs report makes it more likely that the Federal Reserve will slash interest rates again at its March 18 meeting in a bid to prevent or shorten a recession.
Wall Street, through the futures market, is expecting a three-quarters of a percentage point cut, which would bring the benchmark federal funds rate to 2.25 percent. Banks would follow suit by lowering the prime rate to 5.25 percent.
Stocks dipped yet again Friday. The Dow Jones Industrial Average fell 146.70 points to close at 11,893.69. The S&P 500 was off 10.97 points to close at 1293.37, while the NASAQ was down 8.01 points to 2212.49.
The job losses aren't yet in the hundreds of thousands associated with deep economic turndowns. But job losses in consecutive months seldom happen outside of recessions. The last such consecutive months of falling employment were in May and June 2003, when the economy wasn't in recession.
Jobs also are a lagging indicator, providing a snapshot of past business activity. And since recessions aren't called until the economy has been in one for months, the dour job numbers clearly point to an economy that already was slowing drastically when growth braked to just 0.6 percent during the final three months of 2007.
Problems in housing dominate headlines, but until late last year the broader economy was in strong shape. Deepening problems in financial markets, however, have dried up lending for businesses and consumers.
And consumers have pulled back since they've seen their wealth evaporate as the stock market and home prices drop like stones. The RBC Cash Index, a survey of consumer attitudes and spending by household, fell to 33.1 percent in its March reading, announced Friday. That's the lowest since the index was created in 2002.
Friday's jobs report gives a snapshot of which sectors of the economy are struggling. Private-sector employment fell by 101,000 jobs, and the overall picture would have been far worse if not for robust hiring by federal, state and local governments.
Manufacturing led the employment losers, shedding 52,000 jobs in February and almost 300,000 jobs over the past 12 months. Construction employment fell by 39,000 posts and retail employment dipped by 34,000 positions.
Among industries that were hiring, government employment was up by 38,000 jobs, the health-care industry added 36,000 posts and the leisure and travel sector added 21,000 payroll jobs.
The nation's unemployment rate dipped a tenth of a percent to 4.8 percent as more workers exited the economy. It's measured independently of the employment report.
In separate news Friday, the Federal Reserve announced that it would make $100 billion in short-term loans available through two auctions this month. This Trade Auction Facility is a new creation by the Fed that allows banks to bid on short-term loans that have low interest rates. The Fed had been offering $60 billion a month but has upped that to $100 billion to keep banks offering short-term credit to corporations.
http://www.mcclatchydc.com/homepage/story/29729.html
No comments:
Post a Comment