- The Washington Times - Tuesday, March 11, 2003

The February employment report released Friday by the Department of Labor was staggering in its depiction of the depth and breadth of weakness that has engulfed the nation's labor market. After economic growth sharply decelerated in the fourth quarter, February's jobs report offered no evidence of an economic uptick, confirming the increasingly downbeat survey of January and February economic activity released two days earlier by the Federal Reserve.

On the day that the price of oil on the New York Mercantile Exchange reached a 12-year high of nearly $38 per barrel, reflecting a nearly 60 percent increase over a year, the government reported that nonfarm payrolls jettisoned more than 300,000 jobs in February. It was the largest monthly decline in employment since October and November 2001 in the wake of the September 11 terrorist attacks.

Goods-producing industries shed 104,000 jobs, including 53,000 in manufacturing, which has now experienced a decline in employment for 31 consecutive months. For the first time since 1946, the seasonally adjusted number of production workers in the manufacturing sector fell below 11 million. Meanwhile, construction employment lost 48,000 jobs in February.

More alarmingly, service industries, where employment tends to remain relatively stable during economic slowdowns, lost 204,000 jobs in February, wiping out a like number of jobs that had been generated over the previous four months. Despite complaints in recent months from state governments over their fiscal problems, the nonfarm payroll survey revealed that state employment increased by 26,000 jobs last month. Under the present circumstances or any circumstances, for that matter state payroll expansion hardly qualifies as a good omen.

While the household survey indicated that the unemployment rate marginally increased from 5.7 percent in January to 5.8 percent in February, the underlying trends were far more disturbing. For example, February's average duration of unemployment, 18.6 weeks, is now the longest since 1994. It is rapidly approaching 1983's postwar annual record of 20 weeks for average duration of unemployment. That record followed the 1981-82 recession, during which the postwar unemployment rate peaked at nearly 11 percent.

In addition, the proportion of unemployed workers who have been jobless for more than 27 weeks now exceeds 22 percent, the highest level since 1992 and 7 percentage points higher than February 2002, five months after the economy stopped contracting. Last month, there were 1.9 million job-seekers whose period of unemployment exceeded 27 weeks, nearly three times the number in January 2001, when the economy began contracting. In February, there were 450,000 so-called discouraged workers, who have left the labor force and stopped looking for work because they believe no work is available (and, as such, are not considered unemployed). The number of discouraged workers in February was the highest since March 1996.

February's unemployment report confirmed the bad news the Fed summarized in its latest Beige Book. Noting "growth in economic activity remained subdued in January and February," the Fed reported that: "consumer spending remained weak"; "[b]usiness spending was very soft"; construction activities exhibited "weakness on the nonresidential side"; manufacturing activity in most Fed districts was "weak or lackluster"; "[r]etail sales were generally flat" in January, although "terrorism fears boosted the sales of duct tape" in February; there were "significantly higher energy costs in January and February," which act as a tax on consumers and businesses.

The Fed's monetary-policy committee meets next Tuesday. In light of Friday's jobs report, serious consideration needs to be given to another cut in short-term interest rates. Meanwhile, the White House ought to be negotiating with Congress to front-load much more of its 10-year tax-relief plan into 2003. The economy clearly needs stimulus now.

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