NEW YORK (Reuters) - U.S. employers axed 651,000 jobs in February, pushing the unemployment rate to its highest in 25 years, as companies buckled under the strain of a recession that is showing no signs of ending, according to a government report.
KEY POINTS: * While that figure was near economists’ expectations for a 648,000 drop in non-farm payrolls, January and December job losses were revised sharply higher. * The Labor Department on Friday said the unemployment rate surged to 8.1 percent in February, the highest level since December 1983. That was above market forecasts for a rise to 7.9 from January’s 7.6 percent. * January’s job cuts were revised to show a steep decline of 655,000, while December’s payrolls losses were adjusted to 681,000, the deepest since October 1949. * Since the start of the recession in December 2007, the economy has purged 4.4 million jobs, with more than half occurring in the last 4 months.
RICHARD YAMARONE, CHIEF ECONOMIST, ARGUS RESEARCH, NEW YORK:
“The bottom line is that the economy is in a tailspin, businesses are shedding workers at breakneck pace and there’s no reason to expect that to change. A million job losses a month have moved from possible to probable.”
DANIEL NORTH, CHIEF ECONOMIST, EULER HERMES ACI, OWINGS MILL, MARYLAND:
“There is no surprise on the headline, but the revisions were dramatic on the downside. It’s hard to catch a break on the economic data.”
“I think we could hit an employment rate of 10 percent by the end of this year. The employment picture will deteriorate further even we though we could be out the recession in the second half of the year.”
“There are very few bright spots with the exception of the government.”
“The bond market was worried about a death spiral where jobs could be down a million or more, consistent with the kinds of declines you saw in the 1974-75 downturn. This report is terrible, but it doesn’t suggest that pressures on firms have intensified. But it’s still terrible everywhere you look; there were big losses in manufacturing, construction, and in the service sector. The only positive number is in education and health which is the last, most recession resilient industry.
“The good news on inflation is bad news for workers in that you are seeing a significant slowing in wage gains which have already fallen from a 3.9 percent year-over-year gain in December to 3.6 percent year-over-year change in February. We’re seeing a similar movement in the core inflation rate which has decelerated more than I would have suspected.
“The scariest number in the report is the jump in the unemployment rate from 7.6 percent to 8.1 percent. It was 7.2 percent in December and in July 2008 the unemployment rate was 5.8 percent.”
ADDISON ARMSTRONG, DIRECTOR OF MARKET RESEARCH, TRADITION ENERGY, STAMFORD, CONNECTICUT:
“It doesn’t look like crude market is reacting at all, perhaps because the numbers, while bad, were in line with expectations so with the dollar under some pressure it looks like crude may continue to be supported.”
NIGEL GAULT, CHIEF U.S. ECONOMIST, GLOBAL INSIGHT, LEXINGTON, MASSACHUSETTS:
“It’s very bad, clearly. This month’s number is probably in line with the average of what people were anticipating, but we lost 161,000 off the previous two months...
“Before today we didn’t have any months over 600,000. Now it says the last three months all over 600,000 and the unemployment rate went up to 8.1 percent. I’m not going to take any comfort that the fact 651 was not as bad as the worst estimates.
“There’s two pieces of big news. One, the unemployment rate went up by a full half percentage point to 8.1... The payrolls losses headline, roughly in line, maybe what people had expected, not as bad as people had feared.
“But, the revisions now tell us that we’ve been losing between 650,000 and 700,000 for the last three months, and given the recent patter of revisions, I think there’s a strong possibility we’ll come next month and find we actually lost more in February than we’re being told right now.
“The revisions have kept making things worse.”
FRANK MCGHEE, HEAD PRECIOUS METALS TRADER, INTEGRATED BROKERAGE SERVICES LLC, CHICAGO:
“It continues, especially in the precious metals, to add fear to the market. Even though we’re seeing a little bit of a bounce back up in the stocks, we’re seeing some more buying come in to gold. Overall, it will keep the stocks under pressure and we will see the precious metals continue to work higher.
“The fear trade is definitely back in place.”
GEORGE GONCALVES, CHIEF TREASURY/TIPS AND AGENCY STRATEGIST, MORGAN STANLEY, NEW YORK:
“We are still stuck in the reality that things on the job front are pretty grim, although the pace (of job losses) has not accelerated.”
“It is hard to say how much of this economic downturn has been priced into the bond market.”
“Given how grim things are the bid will still remain for Treasuries and we will have to take our cue from whether stocks
go on sliding lower. The slight initial sell-off in Treasuries is more of an adjustment.”
JOE MANIMBO, CURRENCY TRADER, RUESCH INTERNATIONAL, WASHINGTON:
“We saw the payrolls number itself pretty much came in as expected. However, we did see a worse than expected unemployment rate. Overall, the knee-jerk reaction could hit the dollar given the downward revisions we saw to the prior months. It just continues to show the grim state of the labor market, which suggests a deepening U.S. recession. We’re seeing the Japanese yen benefit some as a safe-haven destination.”
JOHN KILDUFF, SENIOR VICE PRESIDENT, ENERGY, MF GLOBAL, NEW YORK:
“These jobless numbers go right to the heart of the economy and energy demand. It is going to be hard for the energy market to continue to defy gravity as it has been in light of these numbers.”
TOM SOWANICK, CHIEF INVESTMENT OFFICER, CLEARBROOK FINANCIAL LLC, PRINCETON, NEW JERSEY:
“A very comforting number because it was not worse than what had been expected. Every area we thought there would be weakness was weak. This was actually a clean number and confirms what we have gone through the last two months. It is not positive but it should be a relief to those looking for an outsized number that we did not get. They confirm that the economy was falling off a cliff and we needed that missing link to understand how things could have fallen. You see it in bonds — giving up some of their gains and stocks are stable. Overall, the employment figure was not worse than expected.”
SUBODH KUMAR, CHIEF INVESTMENT STRATEGIST, SUBODH KUMAR & ASSOCIATES, TORONTO
“The numbers were weak and the unemployment rate is moving higher, but the markets have been primed to think that no matter what data you get, the results will only get worse. I think you’ll start to see the market realize that though the unemployment rate goes up, the numbers aren’t worse than expected. I think we’re in that process now, with tough numbers, but not worse than expected.
“In my opinion, the markets are below where they should be, but they need to see more information and news on credit financing and banks financing before they move up. If those pieces fell into place, the markets would move up sharply. I would consider the 750 level for the S&P 500 to be about neutral.”
GARY THAYER, SENIOR ECONOMIST, WACHOVIA SECURITIES, ST. LOUIS, MISSOURI:
“The payroll numbers are very weak. With the revisions, we’ve had significant job losses in the past four months. Companies are reducing workers and output in order to bring inventories into line with weak sales.
“The only positive sign for the economy is that consumer spending may have picked up in February with chain store sales up on a year over year basis for the first time since the credit crisis hit last fall. If spending holds up, that may get us closer to the end of these job cutbacks.”
MARKET REACTION: STOCKS: U.S. equity index futures rise. BONDS: U.S. Treasury debt prices turn lower. DOLLAR: U.S. dollar falls versus euro.