INSTANT VIEW: U.S. payrolls drop more than expected in March

NEW YORK (Reuters) - U.S. employers cut payrolls for a third month in a row in March, slashing 80,000 jobs for the biggest monthly job decline in five years as the economy headed into a downturn, government data on Friday showed.

KEY POINTS: * The Labor Department revised the first two months of the year's job losses to a total of 152,000 from a previous estimate of 85,000. The March unemployment rate jumped to 5.1 percent from 4.8 percent, the highest since a matching rate in September 2005. * The March job report was more bleak than expected. Economists polled ahead of the report forecast a decline of 60,000 in non-farm payrolls and a rise in the unemployment rate to 5 percent. * During the first quarter of this year job losses averaged 77,000 a month, compared to average monthly gains of 76,000 in the last half of 2007, according to Keith Hall, Bureau of Labor Statistics Commissioner. * Job losses were widespread during the month, with the biggest losses in the construction and manufacturing sectors.

COMMENTS:

ERIC WITTENAUER, ANALYST AT WACHOVIA SECURITIES, ST. LOUIS:

"The payrolls data were initially supportive as the dollar weakened. But economic concerns tend to weigh on a market that has weak demand and gasoline supplies looking robust ahead of driving season."

ROBBERT VAN BATENBURG, HEAD OF GLOBAL RESEARCH, LOUIS CAPITAL MARKETS, NEW YORK

"Based on the labor market, you are looking at a recession. The only silver lining is in the household survey, it registered a modest 24,000 decline in employment versus 250,000 decline in February. But it does swing dramatically. This is likely due to the huge amount of available labor in March.

This will allow the Fed for further easing in monetary policy without a rise in core inflation."

T.J. MARTA, FIXED INCOME STRATEGIST, ROYAL BANK OF CANADA CAPITAL MARKETS, NEW YORK:

"That's a very poor number, with not only a downward surprise in March but downward revisions to the prior numbers.

"If you look at initial claims, continuing claims and non-farm payrolls, they are all pointing to similar levels we had at the beginning of or during the 2001 recession. It is hard to say we are not in recession.

"The price action was a kneejerk reaction lower in Treasury yields."

RICHARD YAMARONE, CHIEF ECONOMIST, ARGUS RESEARCH, NEW YORK:

"It's not pretty, but then again, it's not consistent with a steep drop off in economic activity either. Recessions are accompanied by steep, 200,000 to 300,000 loss numbers. If a recession does ensue, it would more likely be a shallow and shortened nature. This was the biggest drop since March 2003, and we never had a recession after that. The 5.1 percent unemployment rate is low by historical standards, but it's not good news in the current environment."

AL GOLDMAN, CHIEF MARKET STRATEGIST, WACHOVIA SECURITIES, ST. LOUIS:

"It was disappointing because investors have been hoping that there would be some evidence that maybe the economy was starting to stabilize.

"We're probably going to have a soft opening. But in the bigger picture, I think the market is in a bottoming process, that we've seen the lows, that bottoms take a while. I think momentum is up and early weakness would be a buying opportunity.

"One of the strongest groups the last couple of weeks have been economy-sensitive stocks. Why? Because the market was starting to bet beyond the valley, that there are peaks ahead... This is not a positive, but not a major negative."

WILLIAM SULLIVAN, CHIEF ECONOMIST, JVB FINANCIAL GROUP, BOCA RATON, FLORIDA:

"Let the recession begin! This report, showing across-the-board weakness in the labor market as the first quarter came to a close, confirms that the U.S. economy is in a recession. The unemployment rate rose sharply to 5.1 percent, the highest reading since September 2005.

"Most important was the weakness in private payrolls. Government payrolls added 18,000 jobs, so private payrolls were down 98,000. Business planners have become extremely cautious about the economic outlook and are starting to reduce staffing levels to control costs.

"This should be constructive for bonds because it pressures the Fed to ease monetary policy later this month and it raises the prospects for the Fed to cut the funds rate by a half percentage point instead of a quarter percentage point."

STEVE GOLDMAN, MARKET STRATEGIST, WEEDEN & CO. IN GREENWICH, CONNECTICUT:

This is weaker-than-expected but not the end of the world. I think it's bad, and initially there may be a knee jerk reaction lower in stocks, but I think it has partly been anticipated over the past few months that the economy is weakening.

We've now had three months of negative jobs growth, and historically that tends to bode well for stock prices three, six, nine months later. I think stocks will try to pull back later in the session.

RUDY NARVAS, SENIOR ANALYST, 4CAST LTD, NEW YORK:

"The numbers are pretty bad. They're weak across the board and you had downward revisions for the past two months. Before there was a debate about whether we were in recession but I think this settles it. We've passed the tipping point. The unemployment rate spike also suggests the prior month's decline was misleading. This suggests the Fed rate cuts were justified since we're now at a level that can be considered below full employment. Stocks have been rallying and bonds have been selling off but these numbers indicate those moves were unwarranted. People were living in la-la land."

ADAM FAZIO, CURRENCY STRATEGIST, CIBC WORLD MARKETS, NEW YORK:

"The payrolls number confirms what many people know about the U.S. economy -- that it is weakening. There was a big move in the Dow futures and that pushed dollar/yen lower. That's due to heightened risk aversion after the jobs report. But overall, the jobs number is not that bad. I have seen worse. I think the dollar's move could be contained."

CARL LANTZ, U.S. INTEREST RATE STRATEGIST, CREDIT SUISSE, NEW YORK:

"Weak across the board. Revisions look weak. Given that we've cheapened up quite a bit here in recent days, bonds will do well today."

"There doesn't appear to be any silver lining. It shows that we're right in the middle of a recession that will probably take a while. Our expectation is that it will be a longer recession than the last two and we're just in the beginning."

DAVID BIANCO, CHIEF U.S. EQUITY STRATEGIST, UBS, NEW YORK:

"It's not a good number, clearly. But the market has been braced for a bad number. Almost every investor equity and otherwise would acknowledge that we are in a recession but we still think it is a mild recession and we are going to have pretty good profit conditions in the S&P 500 for this quarter and for the rest of the year."

MARKET REACTION: * BONDS: U.S. Treasuries jumped initially but gave back much of the gain. * CURRENCIES: The dollar dropped initially but quickly rebounded. * STOCKS: U.S. stock index futures dropped initially but recovered half the loss and remain positive on the session. * RATE FUTURES: Implied chances of a 50 basis point cut in the Fed funds rate later this month rose to 38 percent from 24 percent before the data.