Today's Nasty Jobs Report: What You Need to Know

The bad news: The employment picture looks bleaker after the Labor Department said the economy shed 63,000 jobs during February. It's the second month of job losses, and the monthly drop was the worst in five years. Factory and construction jobs led the declines, but retailers were cutting back too.

The jobless rate fell back to 4.8 percent from 4.9 percent, but analysts blamed the decline on more unemployed Americans leaving the job hunt.

What it means: Recession is now more likely, even though the Federal Reserve is expected to slash interest rates further this month. Following the payrolls report, futures traders now expect a three-quarter-point cut in the Fed funds rate to 2.25 percent when policymakers meet on March 18, with a 25 percent chance central bankers will lower interest rates by a full point. Treasuries rose on the news—meaning bond traders became more pessimistic on the economy—and on expectations of continuing credit woes despite the Fed's announcement that it would add $100 billion in short-term auctions this month to help provide liquidity. It's the latest attempt by the Fed to get frozen credit markets moving again, and central bankers signaled willingness to do more if markets stay jammed.

Economists respond:
Ian Shepherdson at High Frequency Economics said, "The underlying trends are horrible, with worse to come. The Fed has to ease much more."

Nigel Gault, chief U.S. economist at Global Insight: "The debate should no longer be about whether there is or is not a recession, only about how deep it will be." He warned that the United States "should expect to see more job losses in the months ahead."

Goldman Sachs called the job market "ugly" and "fully consistent with recession."

In a note, it said, "We have cut our terminal funds rate to 2 percent from 2.5 percent, anticipating 50bp rate cuts at each of the next two meetings, if not on a more expedited schedule."

Mike Englund at Action Economics says the employment data "show a clear downward spiral in job growth since October that is reflective of a pattern that might be expected if a recession began in Q4. If the economy was gauged by these figures alone, the conclusions would be pretty clear."

The (minor) upside: The Fed has some room to maneuver as inflation pressures succumb to slowing growth. The Future Inflation Gauge, a forecast of inflation pressures by the Economic Cycle Research Institute, fell to a four-year low in a report released Friday.