Friday, April 4, 2008

Economy sheds 80,000 jobs in March

WASHINGTON (Reuters) — Employers cut payrolls for a third month in a row in March and the unemployment rate jumped to a 2-1/2 year high, more evidence that a housing downturn and credit crisis may have pushed the economy into a recession.
The Labor Department on Friday reported that March non-farm payrolls fell 80,000, biggest decline in five years.

It also said the March unemployment rate jumped to 5.1% from 4.8%, highest since a matching rate in September 2005. The 5.1% rate is still relatively low by historical standards.

Adding to the bleak picture, the department revised the first two months of the year's job losses to a total of 152,000 from a previous estimate of 85,000.

The March job report was more bleak than expected. Economists had forecast a decline of 60,000 in non-farm payrolls and a rise in the unemployment rate to 5%.

FIND MORE STORIES IN: New York | Labor Department | Federal Reserve Chairman Ben Bernanke | Bureau of Labor Statistics | Credit Suisse | Keith Hall
"There doesn't appear to be any silver lining. It shows that we're right in the middle of a recession that will probably take a while," said Carl Lantz, U.S. interest rate strategist at Credit Suisse in New York.

"Our expectation is that it will be a longer recession than the last two and we're just in the beginning," Lantz added.

During the first quarter of this year job losses averaged 77,000 a month, compared to average monthly gains of 76,000 in the last half of 2007, according to Keith Hall, Bureau of Labor Statistics commissioner.

Job losses were widespread in March. Construction, manufacturing, retailing, financial services and various business services all racked up losses. That overwhelmed gains elsewhere, including in education and health care, leisure and hospitality as well as in government.

With the pace of hiring slowing down, the number of unemployed people increased to 7.8 million in March; workers with jobs saw only modest wage gains at the same time.

Average hourly earnings for jobholders rose to $17.86 in March, a 0.3% increase from the previous month. That matched economists' forecasts. Over the past 12 months, wages grew 3.6%. With lofty energy and food prices, workers may feel like their paychecks are shrinking.

The economy is suffering the effects of a housing collapse, a credit crunch and a financial system in turmoil. That's causing people and businesses to hunker down, crimping spending, capital investment and hiring. Those things in turn further weaken the economy in what has become a vicious cycle.

For the first time, Federal Reserve Chairman Ben Bernanke acknowledged Wednesday that the country could be heading toward a recession, saying federal policymakers are "fighting against the wind" in combating it. Many other economists and the public believe the recession already has arrived.0

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