Analysis: Sharp job drop suggests US economy in recession

Updated: 2008-03-09 14:50

WASHINGTON - The Labor Department has reported that US employers cut their payrolls by 63,000 in February, the biggest job reduction in five years, reinforcing a widening view that the US economy is falling into recession.

"Among economists and politicians, the debate is shifting to how deep the downturn will be and how to ease it," said a report in Saturday's Wall Street Journal.

Many economists had earlier said that the labor market, while weakening, did not indicate an economic recession, the journal reported, but many changed their views following the government report to agree that the US economy is already in a recession.

February's sharp drop in jobs also defied economists who had been expecting an increase of about 25,000 jobs in payrolls.

In addition, job losses in January had been revised to 22,000, more than the 17,000 initially estimated. It was the first monthly back-to-back job losses since May and June 2003.

Even December's job gain of 82,000 was revised downward by half.

Workers' wages, however, grew at a modest pace in February.

Their average hourly earnings rose by 0.3 percent to 17.80 US dollars, in line with economists' expectations. Over the last 12 months, wages increased by 3.7 percent.

The health of the job market is critical for the overall economy. The big worry is that companies, affected by a severe housing slump and a credit crisis, might further cut back on hiring.

"For most of us, we believe that recession is a foregone conclusion," said Ellen Zentner, an economist at the Bank of Tokyo-Mitsubishi in New York.

"Now that raises the question of how mild will it be or how deep could it be. And we think that the US economy will experience a recession in 2008, but that it will be very mild," she stressed.

"I believe we are facing the most serious economic and financial stresses that the US has faced in at least a generation -- and possibly much longer," Lawrence Summers, former treasury secretary during the Clinton administration, said Friday at a Stanford University conference.

"We are in nearly unprecedented territory with respect to financial strain."

"We now think the economy can be described as having entered a recession in early 2008," said Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York.

The darkening economic outlook, coming just nine months before the presidential election, puts enormous pressure on President George W. Bush.

   1 2   

Top World News  
Today's Top News  
Most Commented/Read Stories in 48 Hours