Recession jitters balloon in the US as labor market sheds 63K jobs in February

Recession jitters ballooned in the US economy after its labor market shed 63K jobs in February, its fastest rate since March 2003. The February NFP numbers belied market expectations of a 25K increase. Job losses suffered in January were worse than first reported, revised to -22K from -17K previously. Two successive months of negative jobs growth does not augur well for an economy slated to be on the brink of a recession. The payroll declines hit almost every sector of the US economy, except for government jobs. However, the gains in government jobs (+38K) did little to offset the massive fall in private employment (-101K). While the goods producing sector extended its downfall, cutting an additional 89K jobs in February (-54K previously), dwindling support from the services sector (+26K from +32K previously) is a major concern for the embattled U.S economy. Substantial job losses in retail trade (-34K) and financial services (-12K) have been primarily responsible for the slowdown in services employment. Within financial activities, employment in credit intermediation (which includes mortgage lending and related activities) has fallen by an additional 5K last month. The manufacturing sector, which has been slashing jobs continually for the past 20 months now, axed 52K more jobs in February (-31K previously) while the construction sector followed suit as employment slumped by 39K from -25K previously. The construction sector has been on a downtrend since the sub prime fiasco unfolded as declining home sales and tightening mortgage lending standards have together dented builders' sentiment. The industry has lost a total of 321K jobs since its peak in September 2006. Meanwhile, the February unemployment rate edged down to 4.8% from 4.9%. This is primarily because some job seekers dropped out of the labor force. The size of the US labor force declined by an estimated 450,000 in February, thereby driving down the unemployment rate. Average hourly earnings increased 0.3%, up 3.7% on a YoY basis. The bleak job report has reinforced the widening view that the US economy is falling into a recession. Amidst the ongoing turmoil in the housing and financial markets, the report has heightened fears of a 'negative feedback loop" in which financial market strain lead to a weaker economy, which in turn leads to more financial market turbulence. The February data supports the Fed's recent aggressive response to signs of economic weakness and suggests further easing at its next FOMC meeting.