The U.S. economy shed jobs for the first time in more than four years last month as growth sputtered to a halt and mounting job losses in housing and manufacturing spread to other sectors.
Economists said the weak job market portrayed in a Labor Department report yesterday both confirms fears that the economy could be slumping toward recession and adds to the downward momentum. Poorer job prospects have become an additional burden on consumers, who already are buckling under the burden of high gas prices and record debt.
“The economic expansion has stalled,” said Roger M. Kubarych, economist with UniCredit Markets.
While 55,000 job losses in construction, housing and auto-related industries led the downturn last month, the widening weakness led to rare losses in usually robust sectors as well, including state and local education and professional and business services. Only private education and health care employment continued to exhibit healthy growth.
Revisions by the department also showed that the economy created 376,000 fewer jobs during 2007 than originally reported. The total of 1.14 million new jobs was less than 100,000 a month — not enough to keep pace with the growth in population and job seekers. As a result, the unemployment rate rose from a low of 4.6 percent to 4.9 percent last month.
“There are certainly some troubling signs, serious signs that the economy is weakening and we’ve got to do something about it,” said President Bush, urging the Senate to complete work on a $150 billion economic stimulus bill that passed the House this week.
The House bill features tax rebates of up to $1,200 for married couples that the Treasury is expected to mail in the spring, helping to boost consumer spending. Senate Democrats want to add extended unemployment benefits, emergency heating assistance and tax rebates for veterans and senior citizens, creating issues that the White House and House leaders fear could delay the tax relief.
“Unemployment insurance is a highly effective form of economic stimulus, generating $1.73 of economic growth for every $1 spent,” said Sen. Charles E. Schumer, New York Democrat. “We should not abandon this proven stimulus measure because the administration is ideologically opposed to such a program.”
While the tug-of-war over the stimulus bill tightened in Washington, the increasingly bleak news on the economy grew into a major issue on the presidential campaign trail, with Democratic candidates seeking to highlight the deterioration that has occurred under President Bush.
“We are sliding into a second Bush recession,” said Sen. Hillary Rodham Clinton. The New York Democrat has pushed for more vigorous action to stem the hemorrhaging in housing that is a root cause of the economic slump, including a 90-day moratorium on foreclosures.
Evidence that the economy is producing a dwindling number of jobs, which are the most important support for consumers in the economy, is a principle reason why Congress and the White House suddenly overcame their differences last month and drafted the economic stimulus bill, Mr. Kubarych said.
It also was an important reason the Federal Reserve started cutting interest rates “in earnest” by a record 1.25 percentage points in the past two weeks, he said. Mr. Kubarych is optimistic that the combined actions will serve to revive economic growth later this year.
The dramatically lower rates have ushered in a major refinancing wave by consumers burdened with debt and facing big increases in their mortgage payments. Just as important, he said, it will help to nurture ailing banks and securities firms back to health by slashing their borrowing costs and making lending more profitable.
Wall Street financial titans have been shaken by the housing collapse and related credit crunch, and their troubles have preoccupied the markets, press and political leaders. But many Main Street businesses say they remain largely untouched by the turmoil.
“Recession schmecession,” said Michael Alter, president of SurePayroll, a payroll processing service for small businesses, which he said continued to add workers last month. “The news of the demise of the economy has been greatly exaggerated.”
Small businesses have been taking advantage of the dearth of hiring by big companies to take on much-needed skilled workers they had trouble attracting during boom times, he said.