White House unhappy with jobs report, sees rebound

WASHINGTON (Reuters) - The Bush administration on Friday voiced disappointment with the latest U.S. employment data and admitted that a recession was possible but forecast flat economic growth in the first quarter with a pick-up later in the year.

The Labor Department reported that March non-farm payrolls fell by 80,000, the biggest decline in five years, as U.S. employers cut payrolls for a third straight month.

"We're obviously not happy with today's jobs report -- the negative estimate of jobs and the increase in the unemployment rate," White House spokesman Tony Fratto said.

"The weakness in this quarter has been expected with economic growth about flat, and a soft jobs market. That's why we quickly pushed for the economic stimulus package," he said.

The jobs report heightened concerns of a recession, but the White House reiterated its view that a recession was determined by the National Bureau of Economic Research and that it was more important to take action to shore up the economy.

The U.S. Treasury's top economist said he agreed with Federal Reserve Chairman Ben Bernanke's comments on Wednesday that a recession was possible, but added that the label on the situation was less important than the government's actions to remedy it.

"We know it's a slowdown," Treasury assistant secretary for economic policy Phillip Swagel told a news briefing.

"Regardless of where precisely GDP (gross domestic product) growth is, we know we're going to be growing considerably less than potential and that is going to show up in all of these things that are important to Americans," such as jobs and income.

The comments were the closest that Bush administration officials have come to suggesting that a recession may be at hand, even though many private economists have been saying that the economy is contracting.

U.S. Treasury Secretary Henry Paulson has previously said that he believes that the economy would continue to grow, with major downside risks from the housing correction and financial market turmoil.

FIRST-HALF CONTRACTION?

Bernanke, in testimony before the Joint Economic Committee, said Fed estimates showed an economy that was slightly growing but there was "a chance that for the first half as a whole, there might be a slight contraction."

About a month ago, the chairman of the White House Council of Economic Advisers, Ed Lazear, said the administration had "downgraded" its economic forecast for the first quarter.

At that time, he said it was not known whether the economy would contract in the first-quarter, but an expansion of just a half-percent would be a concern.

The White House on Friday said economic growth was expected to pick up later this year.

Swagel said the economic stimulus package that will deliver tax rebate checks of about $1,200 per married couple starting in May would add 500,000 to 600,000 jobs to the economy by year-end, most likely in services sectors.

Democrats in Congress used the grim jobs news as an opportunity to argue for more drastic measures to help homeowners avoid foreclosures and another economic stimulus package.

"We need an economic program that rebuilds America and offers real help to the middle class," said Rep. Rahm Emanuel of Illinois, who chairs the House Democratic Caucus. "The Democratic Congress will now begin work on a second stimulus package to help American families and get our economy back on track.

(Reporting by David Lawder and Tabassum Zakaria; Editing by Tom Hals)