The U.S. unexpectedly lost jobs in February for the second consecutive month, adding to evidence the economy is in a recession.
Payrolls fell by 63,000, the biggest drop since March 2003, after a decline of 22,000 in January that was larger than initially estimated, the Labor Department said today in Washington. The jobless rate declined to 4.8 percent, reflecting a shrinking labor force as some people gave up looking for work.
A weakening job market, combined with lower home values, higher fuel bills and stricter lending rules, raises the odds consumer spending will keep slowing. Falling employment is one reason Federal Reserve Chairman Ben S. Bernanke has signaled central bankers are prepared to lower interest rates again.
``All the lights are flashing red,'' said Nariman Behravesh, chief economist at Global Insight Inc. in Lexington, Massachusetts, in an interview with Bloomberg Television. ``We're in a recession. I don't think there is any doubt about it at this point.''
Minutes before the figures were released, the Fed said it will expand two short-term auctions this month to $100 billion, from $60 billion, to address ``heightened liquidity pressures'' in markets. Treasury notes surged and the dollar weakened after the employment figures.
Worse Than Anticipated
Economists had projected payrolls would rise by 23,000 following a previously reported 17,000 drop in January, according to the median of 76 forecasts in a Bloomberg News survey. Estimates ranged from a decline of 110,000 to a gain of 70,000.
The jobless rate was forecast to rise to 5 percent from January's 4.9 percent, with projections ranging from 4.8 percent to 5.2 percent.
Revisions reduced by half the 82,000 increase in payrolls previously reported for December.
Service industries, which include banks, insurance companies, restaurants and retailers, added 26,000 workers last month. Retail payrolls fell by 34,100, the biggest drop in more than five years.
Payrolls at builders fell 39,000, the eighth consecutive month of cutbacks.
Homebuilders are trimming staff as the biggest housing slump in a quarter century deepens. To make matters worse, commercial construction projects are now also on the decline, indicating firings at non-residential builders are likely to increase.
Housing Meltdown
The real estate recession and meltdown in financial markets have led to growing dismissals at banks, mortgage, and management companies.
``There's significant weakness in the job market because of construction declines,'' said David Berson, chief economist at Walnut Creek, California-based PMI Group Inc., the second- largest U.S. mortgage insurer. ``For the next six months or so, we may get small negative numbers on payrolls.''
Manufacturing payrolls dropped by 52,000, the biggest decline since July 2003, after falling 31,000 a month earlier. Economists had forecast a drop of 25,000.
Government payrolls increased by 38,000. That means the total decline in private payrolls for the month was 101,000, the biggest drop since March 2003.
Working Week
The average work week was unchanged at 33.7 hours. The average factory work week and overtime hours were unchanged. Average weekly earnings rose $1.68 to $599.86.
Workers' average hourly wages rose 5 cents, or 0.3 percent, to $17.80, in line with forecasts. Hourly earnings were up 3.7 percent from February 2007. Economists surveyed by Bloomberg had forecast a 3.6 percent gain for the 12-month period.
Americans, whose spending accounts for more than two-thirds of the economy, are less upbeat about finding work, a Conference Board report showed last week. The share of consumers who said jobs are plentiful fell and the proportion who said jobs are hard to get jumped, pushing consumer confidence down to a five- year low in February.
``The economic situation has become distinctly less favorable,'' Bernanke said in testimony to Congress last week.
The Fed chairman referred to ``downside'' risks for the economy four times, including ``the possibilities that the housing market or the labor market may deteriorate more than is currently anticipated and that credit conditions may tighten substantially further.''
Investors project the Fed will lower the benchmark interest rate by at least half a point between now and its next meeting on March 18, futures prices show.
Fed Outlook
The central bank's regional economic survey this week said ``the hiring pace slowed in various sectors and labor markets loosened somewhat in many districts,'' as economic growth cooled in eight of 12 regions since the start of 2008.
Adecco SA, the world's biggest temporary-employment company, said this week that fourth-quarter profit declined as hiring slowed in the U.S. The Swiss company also said it may miss its long-term goal of sales growth of 7 percent to 9 percent.
``We've been seeing a weak U.S. market for more than a year now,'' Chief Executive Officer Dieter Scheiff said in a March 4 interview.
To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net Source- Bloomberg
