A crucial pillar of the country's economic well-being has cracked. U.S. employers cut jobs last month for the first time in more than four...
WASHINGTON — A crucial pillar of the country’s economic well-being has cracked.
U.S. employers cut jobs last month for the first time in more than four years, a shower of pink slips that were starkest signal yet the economy is grinding to a halt if it hasn’t already toppled into recession.
Conditions are deteriorating, according to the latest employment snapshot by the Labor Department, which showed nervous employers slicing payrolls by 17,000. The country hadn’t seen such a nationwide job loss since 2003, when employers were still struggling to recover from the last previous recession.
The news confounded economists, who were expecting 70,000 new jobs, according to Thomson/IFR.
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“We are certainly on thin ice,” said John Silvia, chief economist at Wachovia. And even President Bush, normally a cheerleader for the economy, said there were “serious signs” it was weakening.
Job losses were widespread last month. Factories, construction companies, mortgage brokers and real-estate firms were among those eliminating jobs — casualties of the housing bust and credit crunch. The government cut jobs for the first time since last July.
All those cuts swamped job gains in education, health care, retailing and elsewhere.
The unemployment rate actually dipped slightly to 4.9 percent, from 5 percent in December, as people left the labor force.
“Discouraged by a sluggish job market, many more adults are sitting on the sidelines,” said Peter Morici, an economist and business professor at the University of Maryland.
Wage growth also slowed, another indication of belt-tightening. Smaller wage gains could make people who still have jobs — already squeezed by high energy prices — reluctant to spend, further hurting the economy.
Figures to be revised
The latest figures look immediately depressing, but there’s disagreement about what they show — and whether they’ll change drastically when they’re revised later this month.
If the job-loss figure stands, this will be the first time payrolls have shrunk in more than four years. But the same headlines ran in September, when August payroll figures initially showed a loss of 4,000 jobs. The data was later revised to show a gain of 89,000 jobs.
Those revisions are why Eugenio Aleman, senior economist at Wells Fargo, calls the payroll figures “highly dubious.” When the numbers are revised “we could easily have January net employment being either minus 150,000 or plus 150,000. Stay tuned,” he said.
But government’s annual revisions — also released Friday and based on more complete information — showed job creation was even weaker last year than initially thought. The economy added an average of just 95,000 jobs per month in 2007, versus an earlier estimate of 111,000 a month. In 2006, payroll employment grew by an average of 175,000 a month.
Numbers in perspective
Compared with the huge number of people in the total labor force — 153.2 million workers — the 17,000 job reduction is tiny. That’s why the Bureau of Labor Statistics, describing Friday’s payroll number, called it “essentially unchanged.”
Rough draft or not, Friday’s data are just the latest indication that the economy has dipped into recession, said Bernard Baumohl, director of the Economic Outlook Group.
“For most Americans, whether the economy grows at plus-one percent or minus-one percent, they won’t be able to tell the difference. “It’s still going to feel awful.”
People running companies are concerned.
“They are thinking if there is some capital spending I should postpone for a while, I should do that. If there is some hiring I don’t necessarily need to do right now, I can put that off for a few months to see what happens,” said Joel Naroff, president of Naroff Economic Advisors.
With economic growth slowing this year, the unemployment rate will climb again. In fact, Mark Zandi, chief economist at Economy.com, predicts the jobless rate will rise to near 6.5 percent in early 2009.
Friday’s Labor Department figures ran counter to a private report Wednesday that suggested hiring rebounded last month. Companies hired 130,000 additional workers last month, according to data compiled by ADP Employer Services. The figures include only private employment.
Information from Bloomberg News and Associated Press reporter
Ellen Simon is included in this story.