Unemployment Report Shows Economic Frailty
ROBERT SIEGEL, host:
From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.
MELISSA BLOCK, host:
And I'm Melissa Block.
The U.S. economy is losing jobs at a rate not seen in five years. That's according to a report from the Labor Department today. U.S. payrolls shrank by 63,000 jobs in February, after another decline the month before.
President Bush acknowledged today that the economy has slowed. His economic advisers said we think this is going to be our weakest quarter. And stock prices tumbled again today.
We have two reports on the economy, starting with NPR's Jim Zarroli.
JIM ZARROLI: The downturn in the jobs market last month was unusually broad. If it hadn't been for a temporary increase in government hiring, nearly 100,000 jobs would have disappeared from U.S. payrolls. Nigel Gault is an economist at Global Insight.
Mr. NIGEL GAULT (Economist, Global Insight): It's not just in areas directly related to housing anymore, although housing-related sectors did badly, we lost jobs elsewhere, too.
ZAROLLI: Construction, retail and manufacturing companies all lost jobs. The construction sector has shed 331,000 positions since the peak of the housing boom in September 2006. Even in sectors where the job market is strong, the downturn is being felt in unexpected ways.
Jim Lanzalotto of the recruiting company Yoh says the tech companies he deals with are still hiring. But he says qualified job applicants are often scared to leave the positions they're in and venture into new ones.
Mr. JIM LANZALOTTO (Vice President of Strategy and Marketing, Yoh Services LLC): That's the key thing, because like anything else, there's always a sense of security and stability. When things become unstable, people tend to get - become a little more conservative.
ZARROLI: As U.S. Commerce Secretary Carlos Gutierrez sees it, the labor market isn't as weak as people are saying now. But Gutierrez says there's no doubt a slowdown is underway.
Secretary CARLOS GUTIERREZ (U.S. Department of Commerce): Bottom line is we're going to this correction, we're going to get through it, but it is going to be - it's, you know, it's a tough quarter, and probably it will be sluggish until the second half of the year.
ZARROLI: U.S. officials say the government's stimulus package and the recent interest rate cuts by the Federal Reserve should get the economy moving by summer. Fed policymakers took steps today to pour more money into the nation's banking system. But the Fed's actions, so far, haven't stemmed the economy's downturn.
Economist Nigel Gault says the cuts in rates are yet to filter down to the broader economy.
Mr. GAULT: Well, what is happening now is that credit conditions in the financial markets are tightening so much that the Fed may cut its own interest rate. But that doesn't mean that the interest rate that a consumer sees or that a homebuyer sees will actually fall. Some of those rates have actually increased.
ZARROLI: I think that's one thing that a lot of people don't understand. If the Fed is lowering interest rates, doesn't that make more money available to banks and lenders? Why should we see this continual tightening of credit?
Mr. GAULT: Well, it does make more money available. The question is whether they want to lend. And the problem is that the appetite for risk amongst lenders is just much, much lower than it was a year or two years ago.
ZARROLI: As the gloom and uncertainty persists, many banks and financial services companies are themselves laying people off. Today's jobs report said the financial sector lost 12,000 jobs last month.
The big finance company GMAC eliminated about 1,000 positions as fewer and fewer people took out auto loans. Gina Proia is a spokeswoman for the company.
Ms. GINA PROIA (Spokeswoman, GMAC): There is a certain amount of uncertainty in the U.S. economy right now, and we are trying to just structure our business in a way where it can, you know, move through the cycle.
ZARROLI: There was one paradox in today's report. The Labor Department said despite the loss in jobs, the unemployment rate fell from 4.9 to 4.8 percent. But even that wasn't the good news it appeared to be. The government said several hundred thousand people left the labor market and quit looking for jobs last month, perhaps out of discouragement. And when that happens, the overall unemployment rate falls.
Jim Zarroli, NPR News, New York.