Thursday 26 April 2018

Jobs setback sparks US recession fears

Washington, April 5, 2008

US employers cut payrolls for a third consecutive month last month and the jobless rate jumped to a two-and-half year high, adding more evidence that a housing downturn and credit crisis may have pushed the economy into recession.

The Labour Department on Friday said non-farm employment fell by 80,000 jobs last month, the biggest decline in five years.

Financial markets saw the drop as reinforcing the need for further Federal Reserve interest rate cuts.

It was the first time the US economy shed jobs for three straight months since a five-month string in 2003, when the economy was mired in a jobless recovery from the 2001 recession.

Adding to the bleak picture, the department said a combined 152,000 jobs were lost in January and February, compared with a previous estimate of 85,000.

The unemployment rate jumped to 5.1 per cent from 4.8 per cent, the highest since September 2005.

"There doesn't appear to be any silver lining. It shows that we're right in the middle of a recession," said Carl Lantz, US 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."

"What we have been looking at over the first quarter is an economy that has entered into recession," Bruce Kasman, chief economist at JPMorgan said.

The White House said it was "not happy" with the jobs report, saying it expected growth to be flat in the first quarter, but pick up later in the year.

The US central bank has already lowered rates by three percentage points since mid-September to prop up an economy hit hard by a liquidity crisis brought on by what many economists see as the worst housing slump since the Great Depression.

Fed chairman Ben Bernanke admitted to Congress this week that a recession was possible.

"It's clearly a period of very slow growth extending back to the fourth quarter of last year, and we are trying to set our policies appropriately for that situation," he said.

A New York Times/CBS News poll released yesterday showed the economy's deepening woes were weighing heavily on the minds of Americans.

Of those polled, 81pc said they believed things were "pretty seriously" on the wrong track, up from 69pc a year ago and 35pc in early 2002.

During the first quarter, job losses averaged 77,000 a month, compared with average monthly gains of 76,000 in the last half of last year.

They were widespread last month, with the biggest losses in construction and manufacturing, two areas that have been bearing the brunt of the economy's slowdown.

Tags: Jobs | US | Recession | setback | fears |


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