Job Losses: Worst in 5 Years

NEW YORK (CNNMoney.com) -- Employers made their deepest cut in staffing in almost five yearsin February, according to a closely watched government report that showed the labor market to be far weaker than expected.
The weak report fueled already mounting recession fears and is likely to influence the Federal Reserve's decision on interest rates later this month.
There was a net loss of 63,000 jobs, according to the Labor Department, which is the biggest decline since March 2003 and weaker than the revised 22,000 jobs lost in January. Economists surveyed by Briefing.com had forecast a gain of 25,000 jobs in the most recent reading.
"These poor jobs data are the strongest evidence yet that the economy has slipped into a recession of uncertain depth and duration," University of Maryland Professor Peter Morici said.
Job losses were widespread, reaching beyond the battered construction sector, which lost 39,000 and manufacturing, where job losses hit 52,000. Retailers cut 34,000 jobs, while business and professional services cut 20,000 jobs.
Temporary staffing firms cut nearly 28,000 from their payrolls, another warning sign of employers pulling back, and hotels cut about 4,000 jobs, a sign that discretionary consumer spending could be on the wane.
Overall the private sector cut 101,000 jobs, with only a gain in government employment limiting losses.
Despite the loss, the unemployment rate improved to 4.8% from the 4.9% reading in January. Economists had forecast the unemployment rate would rise to 5%. The rate fell because of a big jump in the number of people that the government counted as no longer in the labor force.
"Businesses have become too pessimistic about the outlook for the economy, and the capacity of the Bush Administration and Federal Reserve to manage it, to be adding new employees or replacing those that leave," Morici said.
The labor market has weakened significantly in recent months, fueling fears of recession and a series of interest rate cuts from the Federal Reserve.
The Fed is set to meet March 18 to decide what to do with interest rates. Friday's report would seem to suggest more rate cuts are on the way, despite the improved unemployment rate.
"Even the silver lining of a falling unemployment rate has a little rust," said Rich Yamarone, director of economic research at Argus Research. He predicted that the central bank will cut rates by a half percentage point at both its March meeting and again on April 30.