Job losses add fuel for a recession Doubts about recession wane
WASHINGTON — The U.S. economy is sliding toward a recession -- if it's not already in one -- with at least three serious strikes against it: shrinking employment, plunging home prices and a financial sector at risk of paralysis.
The latest piece of bad news landed Friday, when the government said payrolls fell by 63,000 jobs in February after losing 22,000 in January. Private-sector positions sank by more than 100,000 last month.
The news sent the already depressed stock market sliding further. The Dow Jones industrial average fell 1.2%, dropping well below 12,000 points to its lowest level since 2006.
President Bush and the major presidential candidates each responded to the report with sympathetic remarks as well as confidence that he or she would be able to reverse the downturn.
As recently as the fall, the Bush administration predicted moderate economic growth for this year. But Friday the president's top economic advisor conceded that economic output could decline in the first three months of this year.
"We don't really know whether it will be negative or not," Edward Lazear, chairman of the White House Council of Economic Advisors, said of first-quarter growth. "We have definitely downgraded our forecast."
Other analysts were not nearly as tentative.
"We now think the economy can be described as having entered a recession in early 2008," said Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York.
David M. Jones, chief economist at Investors Security Trust in Fort Myers, Fla., had a similar response.
"You almost never have back-to-back payroll declines without a recession," he said.
The Labor Department report was the latest twist of the vise closing in on the Federal Reserve, which must worry not only about shrinking employment but also a financial sector that's spooked about the safety of investments across the board and therefore deeply reluctant to spend or lend. The central bank must cope with these problems without kindling inflation, which some analysts believe it is coming perilously close to doing.
To keep the credit markets from freezing up, the Fed said Friday that it would pump at least $100 billion into the financial system through short-term loans to bond dealers. Fed staffers said mortgage-backed securities that have lost value would be accepted as collateral.
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