Employment Numbers Suggest Recession is Real
Friday, February 01, 2008SUSIE GHARIB: Two big surprises on Wall Street today: a big pullback in hiring by American businesses and a big takeover offer for Yahoo! by Microsoft. First, the employment story. The Labor Department said today that U.S. payrolls fell by 17,000 jobs in January, the first decline in more than four years. Economists had expected payrolls to increase by as much as 100,000 jobs. But the unemployment rate dipped to 4.9 percent, down from 5 percent in December. As Suzanne Pratt reports, many experts say today's report is strong evidence that the U.S. economy is headed into recession.
SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: The latest employment data shows the U.S. unexpectedly lost jobs last month -- the first time that has happened since 2003. Experts say not only does it suggest the Federal Reserve may cut interest rates again soon, but BNP Paribas economist Brian Fabbri sees it as evidence the recession has already arrived.
BRIAN FABBRI, CHIEF US ECONOMIST, BNP PARIBAS: January was another weak month, confirming what most of us, including myself believe, that the economy is truly in recession.
PRATT: Deutsche Asset Management economist Josh Feinman isn't quite as pessimistic about the data.
JOSHUA FEINMAN, CHIEF ECONOMIST, DEUTSCHE ASSET MANAGEMENT: I don't think it's completely clear evidence that the economy is in recession or is headed to recession. But it certainly reinforces the risks that the economy is not far from recession and could slip into one.
PRATT: There is, however, no disputing the fact that job losses were widespread in January, with manufacturers, the government and construction firms all eliminating positions. More optimistic economists were quick to point out that the nation's unemployment rate dropped, something that usually does not happen in a recession. But others think it was simply a normal bounce back from December's three-tenths of a percent increase in the jobless rate.
FABBRI: It's not like this is a rebound and we should be much happier about it. It's very consistent. And, in fact, we can literally say now the unemployment rate is a half percentage point higher than it was this spring and it's certainly on the way higher.
PRATT: In the last two weeks, the Federal Reserve has aggressively cut rates in an effort to mitigate the threat of recession. Experts say the January employment report validates what policy makers have done and suggests they will cut rates again at the March 18 meeting.
FEINMAN: I think it also reinforces the likelihood that their bent is going to remain towards, leaning toward easing.
PRATT: While the outlook for recession is still debatable, experts say there's no denying that employers have grown cautious about hiring. That's because businesses are coping with a crumbling housing market and an ailing economy. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.
