New Job Losses Stoke Recession Fears

WASHINGTON — Economists' fears that the country is in a recession grew stronger Friday as the government reported that another 63,000 jobs disappeared in February.

In light of the biggest employment decline in five years, "the debate should no longer be about whether there is or is not a recession, only about how deep it will be," wrote Nigel Gault, an economist for Global Insight Inc.

The bad news prompted President Bush to defend the economy's long-term prospects.

"I know Americans are concerned about our economy. So am I," Bush said in brief comments at the White House. "It's clear our economy has slowed, but the good news is, we anticipated this and took decisive action to bolster the economy."

Last month, Bush signed a $152 billion package of tax rebates and other measures to stimulate growth. "These incentives are now in place, and they are starting to have an impact," he said. "So long as we pursue pro-growth, low-tax policies that put faith in the American people, our economy will prosper."

But Democrats were quick to condemn the White House's handling of the economy. "The Bush administration's economic policies have failed to create jobs, ... leaving families struggling to make ends meet with rising prices for gas, home heating oil, groceries and health care," House Speaker Nancy Pelosi, D-Calif., said in a statement.

The disappointing jobs report turned off Wall Street investors, who pushed down the Dow Jones industrial average by 146.70 to 11893.69, the lowest level since Oct. 11, 2006.

The job losses heightened expectations that the Federal Reserve Board's policy makers will cut short-term interest rates when they meet March 18. The Fed has cut rates time and again since September, trying to lower borrowing costs enough to promote economic activity.

Those cuts have pushed the federal funds target rate down from 5.25 percent to 3 percent, and the rate may fall another half a percentage point or more at the next meeting.

Despite the cuts, economic conditions have been weakening so quickly that the nation's central bank decided Friday to take even more immediate action. It announced it would dramatically increase the amount of cash being pumped into strained credit markets, hoping to help banks overcome their reluctance to lend to each other in these jittery times.

One of the reasons nerves got so rattled Friday was that bankers and investors learned that nonfarm payrolls were even worse in January than they had thought. The Labor Department revised the January job losses to 22,000, which was 5,000 worse than originally estimated.

The January-February period marked the first back-to-back monthly job losses since May-June 2003, when employers were still recovering from the 2001 recession.

Most economists had been expecting February's payrolls to rise by about 25,000, so they were shocked by the new figures and revisions. They largely blamed the problems on the ongoing housing downturn.

"The woes in the residential construction sector have spilled over into the economy at large," Christian Weller, a senior fellow at the Center for American Progress, wrote in his assessment. "The pain of the fallout of the housing and mortgage crisis is palpable across the entire spectrum of jobs and industries."

In February, though job cuts were widespread, the biggest losses were concentrated in construction, manufacturing, retailing and financial services.

With about 450,000 people giving up their job searches, the unemployment rate actually fell last month by a tenth of a percentage point to 4.8 percent.

House Financial Services Committee Chairman Barney Frank, D-Mass., said in a statement that discouraged Americans have "given up looking for work because the jobs are simply not there." He noted that a smaller percentage of Americans were in the labor force than a year ago.

At a press briefing, Edward Lazear, Bush's top economic adviser, said he expected "this quarter will probably be our weakest quarter."

A recession is regarded as two straight quarters of shrinking economic output. More and more economists now believe that output is shrinking this winter, and will continue to retreat in the spring as well, giving the country its first recession since 2001.

Lazear would not say whether the administration expects back-to-back losing quarters. In any case, the administration doesn't see hard times lingering. "We expect to see strong growth in the summer," he said.