Employers cut jobs for a second month in February while the unemployment rate fell as more people quit looking for work in the weakening job market, the government said Friday in a report that led to further calls of a 2008 recession.
President Bush, responding to the report, said "it's clear our economy has slowed, " and he tried to reassure an anxious public that the long-term outlook is good.He also gently urged taxpayers to spend the rebate checks due to them within months from a stimulus package.
Earlier, his top economic adviser, Edward Lazear, acknowledged that it is possible the economy shrank in the current January-to-March quarter. Lazear's comment is the most pessimistic assessment heard out of the White House.
Shortly before the jobs report was released, the Federal Reserve underscored its concern for the economy by saying it will pump more cash into financial markets to try to ease credit.
The Fed said it will raise its planned March 10 and March 24 auctions to $50 billion each, from $30 billion it had previously announced. The auctions serve as short-term loans to get banks the cash they need to keep lending.
Fed officials also said they would move to even larger amounts at future auctions if necessary.
And the Fed announced another effort to ease credit — a series of repurchase transactions expected to reach $100 billion. In those moves, the Fed buys securities, giving the sellers immediate cash.
The move came after the Fed saw an acceleration in the past few days in a deterioration in credit markets that has been underway worldwide for several weeks, senior Fed staff members said. They stressed the move was not in direct response to the jobs report.
Ultimately, the hope is that the added liquidity will help ease lending conditions, which will in turn help the entire economy, the staff members said.
The Fed also reported Friday that consumers increased their borrowing at an annual rate of 3.3% in January, especially relying on credit cards to finance their purchases. That was up from a 1.8% growth rate in December.
The jobs report said businesses cut a seasonally adjusted 63,000 workers in February, worst monthly showing in nearly 5 years, the Labor Department said. The decline followed a loss of 22,000 jobs in January, worse than the 17,000 initially reported. It was the first time jobs were cut for two straight months since May and June 2003.
The unemployment rate, which is calculated based on a separate survey of households rather than employers, fell to 4.8% in February from 4.9% in January. But that showed 450,000 people exited the labor force — the unemployment rate is calculated based on the number of people working and looking for work. Many of those who left the job market said they wanted a job, but were discouraged, according to the Labor Department.
The data Friday "are a strong indication that the economy has fallen into recession," Bear Stearns economists, who have previously been hesitant to call a downturn, said in a statement. "We think the recession began in December 2007, which makes the last economic expansion six years and one month long."
Says Moody's Economy.com economist Sophia Koropeckyj, "There is little silver lining in this report." She says layoffs will likely increase as the year progresses, as consumer spending weakens and business confidence wanes.