Transcripts

Jobs, Payroll, & Stocks All Fall Down

SUSIE GHARIB: American businesses cut jobs in February at the fastest pace in five years. The Labor Department said today that payrolls unexpectedly fell by 63,000 jobs last month. That intensified concerns about recession and triggered more selling on Wall Street. As Suzanne Pratt reports, many economists are now expecting another big interest rate cut by the Federal Reserve.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: After today's employment data, many on Wall Street now see a U.S. recession as a foregone conclusion. Not only did the economy lose jobs for the second consecutive month in February, but January's decline was revised lower to 22,000 jobs. December's gain was cut in half to an anemic 41,000 jobs. Experts say the revisions highlight steady deterioration in the labor market and suggest the economy may already be in recession. Lehman Brothers previously thought the U.S. might skirt recession. Now its economist, Ethan Harris, says that's unlikely.

ETHAN HARRIS, CHIEF US ECONOMIST, LEHMAN BROTHERS: I think what the payroll number does is it just says the weakening has gotten a little bit faster and it really does look like we're going to be getting negative growth for a while here.

PRATT: Job losses were widespread throughout the economy in February, with hefty cuts coming in construction and manufacturing. However, there were modest gains in hospitality, health and education and government. Surprisingly, the nation's unemployment rate fell 0.1 of 1 percent to 4.8 percent, but experts say the drop reflects a shrinking labor force. Economist Kevin Logan says that's another sign of labor market weakness.

KEVIN LOGAN, SR. MARKET ECONOMIST, DRESDNER KLEINWORT: The overall labor force contracted by 450,000 people. A lot of people are perhaps convinced that there's no employment available in their local area and so are stepping back from the labor force. And maybe people are accelerating retirement. There may be a few things going on.

PRATT: The February employment report fueled speculation on Wall Street that the Federal Reserve would lower interest rates before its March 18th meeting, but most economists believe the next cut will come at that meeting.

HARRIS: I do think that this report seals the case for a 50 basis point cut, if not a 75 basis point cut, from the Fed. The Fed needs to keep moving here as we see new signs that the economy is sliding into recession.

PRATT: Lehman's Harris says he now expects the Federal Reserve to make additional cuts to interest rates later this year. He says policy makers will take the Federal funds rate as low as 1.5 percent from its current 3 percent level. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.