WASHINGTON – Employers slashed jobs by 63,000 in February, the most in five years, the starkest sign yet the country is heading dangerously toward recession or is in one already.
The Labor Department's report, released Friday, also showed that the nation's unemployment rate dipped to 4.8 percent as hundreds of thousands of people — perhaps discouraged by their prospects — left the civilian labor force. The jobless rate was 4.9 percent in January.
Job losses were widespread, with hefty cuts coming from construction, manufacturing, retailing and a variety of professional and business services. Those losses swamped gains elsewhere including education and health care, leisure and hospitality, and the government.
The latest snapshot of the nation's employment climate underscored the heavy toll of the housing and credit crises on companies, jobseekers and the overall economy.
The report also showed that the job losses suffered in January were worse than the government first reported. Employers cut 22,000 jobs, versus 17,000.
It was the first monthly back-to-back job losses since May and June 2003, when the job market was still struggling to recover from the blows of the 2001 recession.
The health of the nation's job market is a critical factor shaping how the overall economy fares. If companies continue to cut back on hiring, that will spell even more trouble.
Friday's report was much weaker than economists were expecting. They were forecasting employers to boost payrolls by around 25,000. However, they were expecting the jobless rate to edge up to 5 percent. The reason why the jobless rate went down, rather than up, is because so many people stopped looking for work and left the labor force.
Workers with jobs, however, saw modest wage gains.
Average hourly earnings for jobholders rose to $17.80 in February, a 0.3 percent increase from the previous month. That was on target with economists' forecasts. Over the last 12 months, wages were up 3.7 percent. With high energy and food prices, though, workers may feel squeezed and feel like their paychecks aren't stretching that far.
With the economy losing momentum, fears have grown that the country in on the brink of its first recession since 2001 or is in one already.
Economic growth slowed to a near standstill of just a 0.6 percent pace in the final quarter of last year. Many economists predict growth in the January-to-March quarter will be worse — around a 0.4 percent pace. Some believe the economy is shrinking now.
Spreading fallout from the housing and credit debacles are the main factors behind the economic slowdown. People and businesses alike are feeling the strains and have turned cautious. Adding to the stresses on pocketbooks, budgets and the economy: skyrocketing energy prices. Oil prices have set a string of record highs in recent days. Gasoline prices have marched higher, too.
To help shore up the economy, Federal Reserve Chairman Ben Bernanke signaled last week that the central bank is prepared to lower interest rates again. Economists predict another cut on March 18, the Fed's next meeting. The Fed, which has been slicing the rate since September, recently turned more forceful. It slashed the rate by 1.25 percentage points in the course of just eight days in January — the biggest one-month reduction in a quarter century.
The White House and Congress, meanwhile, speedily enacted an economic relief package, including tax rebates for people and tax breaks for businesses. That — along with the Fed's rate cuts — should help give a lift to the economy in the second half of this year, says Bernanke.
Still, unemployment is expected to move higher this year. The Federal Reserve predict the jobless rate will rise to as high as 5.3 percent in 2008. Last year, the unemployment rate averaged 4.6 percent.
All the economy's troubles are putting people in a gloomy mood.
According to the RBC Cash Index, confidence sank to a mark of 33.1 in early March, the worst reading since the index began in 2002.