80,000 Jobs Lost, Worst Since 2003; Jobless Rate Spikes

Apr. 7, 2008 (Investor's Business Daily delivered by Newstex) --

Employers shed 80,000 jobs in March, the worst decline in five years, the Labor Department said Friday, the strongest sign the U.S. is in a recession.

The jobless rate jumped to 5.1% from 4.8% in February, the highest since September 2005.

Along with big downward revisions to January and February employment, payrolls fell by 232,000 jobs in the first quarter, a sharp reversal from the 241,000 gained in the fourth quarter in 2007.

"After three consecutive months of losses, it's hard to argue we're not in a recession," said Joel Naroff, chief economist at Naroff Economic Advisors. "The question is how deep will it be and how long it will last."

Gains in government jobs staved off a deeper drop in payrolls last month as private employers cut 98,000 workers, the fourth straight monthly decline.

Broad-Based Job Losses

Builders and factories suffered the biggest losses. But weakness was widespread, with real estate firms, temp agencies and housing-related retailers all shedding staff.

"This is not isolated to just housing anymore, and it starting to spread across all sectors, which is a sign of a recession," said Robert Dye, senior economist at PNC Financial Services.

Construction firms cut 51,000 jobs as housing woes deepened and commercial activity tailed off.

Factory payrolls fell by 48,000 in March, matching the biggest loss since mid-2003. It was the 21st straight monthly decline as auto and housing woes slam the sector.

The strike at American Axel cost manufacturers about 24,000 jobs and has idled almost half of GM's North American work force.

After correcting for the strike, private employment declined at an average monthly rate of 87,333 in the first quarter, said Brian Bethune, chief U.S. financial economist at Global Insight.

"That is not a particularly shocking number," he said. "Declines of this order of magnitude are consistent with our view of a shallow recession in the first half of 2008."

Service industries added just 13,000 workers in March vs. the 2007 monthly average of 130,000.

Naroff saw a few positive nuggets of data in the report.

The workweek lengthened to 33.8 hours from 33.7. Average hourly wages rose 0.3%.

They climbed a solid 3.6% vs. a year earlier, though that's the smallest gain in two years.

The share of industries adding jobs increased, but still remained below 50%, Naroff said.

Stocks actually rallied strongly for much of Friday before fading. The Nasdaq ended up 0.3% and the S&P 500 0.1%. The Dow slid 0.1%.

The gloomy jobs report didn't change market views over Federal Reserve moves.

Futures traders still expect policymakers to cut their benchmark rate by a quarter-point 15 2% at their April 29-30 meeting.

Odds for a half-point 13ove edged up Friday.

The Fed has cut rates by 3 full percentage points since September.

"One shoe has dropped, but I don't think the economy has slid off a cliff," Dye said. "The Fed will want to keep some powder dry in case the downward spiral ramps up."