No good news today from the Labor Department's closely watched report on national employment.
What it said: The economy shed 80,000 more jobs during March, the biggest monthly drop since 2003 and the latest sign that the employment picture is darkening amid the threat of recession.
The jobless rate, based on a separate survey of households, rose to 5.1 percent from 4.8 percent in February. That's the highest since September 2005, when Hurricane Katrina disrupted the economy.
What it means: Declining employment is the latest billboard-size signal that the American economy is either in or close to a recession. Falling housing prices, trouble in the credit markets, and worried consumers make growth unlikely to maintain any momentum through the first half of 2008.
Also, a move above 5 percent in the jobless rate is the first step above the rate many economists consider "full" employment. While the rate is still low by historical standards, this sort of increase in joblessness removes some of the last supports for lingering hopes that the economy will reverse course quickly.
Jobs in the private sector have now been declining for four straight months. Hopes that losses would remain in some of the most vulnerable sectors like manufacturing or housing now appear too optimistic. Losses have spread to temporary jobs and the retail sector, as well as financial firms still in turmoil after the near failure of Bear Stearns, where an estimated 7,000 layoffs still loom.
Economists react:
- Goldman Sachs: "Although job losses are somewhat less broad-based than in February, this report confirms that the economy is in recession." The bank also said the jobless rate will rise further, saying "it's a reasonable guess that more increases lie ahead."
- Michael Woolfolk, senior currency strategist at the Bank of New York, says there's not much the Federal Reserve can do about the situation: "The Fed's attempt to offset recessionary pressures via monetary policy is commendable. However, there is a practical limit to which monetary policy can offset an economic downturn once it has begun."
He sees joblessness rising further, despite more interest rate cuts expected from the central bank when it meets on April 29-30.
- Ian Shepherdson at High Frequency Economics: "Trends are awful; unemployment will keep rising, squeezing spending." That means a half a point cut this month, he says.
- At Global Insight, Nigel Gault reminds us that job woes go hand in hand with the theme of a still-weakening domestic economy. The last bright spot is demand for U.S. goods overseas: "The downturn has spread well beyond the housing sector, its original source. Consumer spending growth has slowed sharply, nonresidential construction appears to have peaked, business equipment spending is slipping, and state and local government finances are coming under increased stress. Essentially, all of the previous props to growth have disappeared—with one exception. Export growth remains robust, while imports are falling. This year, we expect U.S. domestic spending growth to be zero—but [gross domestic product] still grows 1.2 percent, entirely due to the combination of rising exports and falling imports."
Where jobs are in peril: The factory and construction sectors continue to drag down overall job growth. Today's report put the latest declines partly on an ongoing strike at American Axel & Manufacturing that lowered job rolls there and at General Motors plants supplied by the company. The healthcare and leisure sectors managed some mild gains.
Is worse to come? A quick glance at today's headlines shows airlines are feeling the pinch of high fuel costs and cutting back on hiring. Northwest Airlines said Thursday it would freeze hiring of pilots and flight attendants, on the same day ATA Airlines shut down unexpectedly, stranding passengers and employees alike.
For stocks, futures soared before the market opened, but optimism stopped at the opening bell. All major indexes opened slightly lower, though big gains notched on Monday appear to be holding.
