Unemployment Report Shows Economic Frailty

Though the nation's unemployment rate fell to 3.8 percent in February, employers actually cut payrolls by a net 63,000 jobs. The rate fell because so many people decided to stop looking for work — a new sign of weakness in the economy.

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From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.

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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.

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How to Recession-Proof Your Job and Your Finances

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With the unemployment rate at a two-year high and the housing market in a slump, talk of a recession is on the rise. Stephanie AuWerter, editor of SmartMoney, and Stephen Viscusi, author of On the Job, offer tips on what you can do to protect your finances and your job when the economy is looking grim:

Set Up an Emergency Fund. AuWerter recommends having three to six months' worth of living expenses held in savings or a money market account. In the event that you lose your job, you don't want to end up tapping your 401K or relying on credit cards. It's hard to put the money away all at once, AuWerter says, but do it a little at a time and you'll feel better knowing that you have a cushion.

Be Valuable and Visible at Work. "This is a very important time to perfect the art of looking busy," Stephen Viscusi says half-jokingly. Show that you can multi-task. It's important to be visible, so if you're working from home or from a distance, make sure that out of sight doesn't mean out of mind. Remember that human beings make firing decisions, so don't have a bad attitude and don't be a high-maintenance employee. "It's the time to get close to your boss," Viscusi says, "Have that nose as brown as possible." (You can read more job tips in Viscusi's book, On the Job.)

Invest in Yourself, Your Career. Spending money for additional training to switch careers or bring your skills up to date is a great investment, AuWerter says. There are some industries — she gives nursing as one example — where demand for skilled work is so high that employers will pay for your training.

About to Retire? Adjust Your Portfolio. Babyboomers who are on the verge of retirement should be making adjustments in order to avoid pulling too much out of their portfolios in the first year of retirement. This is particularly true when the stock market is down. Retirement today can easily last 30-40 years; AuWerter says people saving for retirement should have a portfolio mix of cash, bonds and stocks.

Invest in Consumer Staples. Items and services that people need to spend money on, regardless of the health of the economy, often do well during times of recession, AuWerter says. She lists health care, utilities and grocery items such as diapers as examples. Some also argue that beer and cigarettes are good bets when money is tight — "When times are rough, people need their vices," AuWerter says.

Avoid Investing in Retail and Financial Sectors. These markets are taking a big hit right now, AuWerter says; though it is likely that there is money to be made here in the long term, it's going to be a rough ride. She says that average investors who don't have the stomach for volatility should avoid these sectors.

Rent or Buy? AuWerter says that if you are going to be in a house for several years — five at least — you are better off buying now than trying to time the market. Trying to time the real estate market is very tricky, she warns. If you are trying too hard to strategize, you may end up sitting out on the sidelines and miss a good window to get in. As long as you have enough of an investment horizon, AuWerter says, buying a house during a recession can turn out OK.

Reduce Your Debt. Viscusi recommends taking one or two credit cards out of your wallet. "Leave them in your dresser drawers," he says. After all, if you aren't carrying them with you, you are less likely to use them. Reduce your debt — and the possibility of going further into debt — as much as possible.

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