Transcripts

Employment Numbers Generate More Recession Fears

SUSIE GHARIB: Grim news today for job seekers. The U.S. economy lost 80,000 jobs in March, the biggest monthly decline in five years. That big head count reduction helped push the unemployment rate to 5.1 percent, a 2.5 year high. As Scott Gurvey reports, many economists say today's employment data is further evidence that the U.S. economy is in recession.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Three straight months of declines in the number of Americans reported working leaves the debate over whether the economy is merely sluggish or actually in a formal recession one of semantics. There was also an increase in the number of people not looking for work because they are discouraged over their job prospects. Senior U.S. economist Jim O'Sullivan of UBS says the report reflects a psychology which feeds on itself.

JAMES O'SULLIVAN, SR. U.S. ECONOMIST, UBS: Once recessions start, they tend to feed on themselves, where weaker employment leads to weaker consumer spending leads to weaker employment, et cetera. And it's really hard to stop that process on a dime. And by later in the year, with all the stimulus in the pipeline and more to come, I think it will turn around. But for the next three or four months, we're more then likely going to see if anything, weaker numbers.

GURVEY: The report shows weakness in virtually every sector. Declines continued in manufacturing, in construction and related industries. There were gains for health care workers and food services workers. There was little change in employment in financial services, indicating that layoffs in those areas have yet to be felt. There is now evidence that investors are adopting recession strategies. Fixed income yields are falling in expectation the Fed will continue to lower interest rates, while the gap between inflation-protected securities and regular treasuries is shrinking, indicating worries about inflation are diminishing. A just-released "New York Times"/CBS News poll says two in three Americans believe the economy is in recession today. Chief economist David Resler of Nomura Securities won't call it a recession, but he says it will last well into next year.

DAVID RESLER, CHIEF ECONOMIST, NOMURA SECURITIES: I think that it's going to be a prolonged period of relatively sluggish growth, where the economy fails to live up to its potential. That's likely to last through all of this year and into the first part of next year. But by the end of 2009, we should have enough correction underway in the housing sector that we'll see the economy improving.

GURVEY: The equity markets held up well in spite of today's report, but many believe another blow to investor confidence will coming after next week, when corporations begin to issue their guidance for the rest of the year. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.