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Vol. 72/No. 12      March 24, 2008

Jobs decline in February
(front page)
WASHINGTON—U.S. employers cut 63,000 jobs in February, according to a March 7 report from the Department of Labor. It was the second consecutive monthly decline, and the third for private sector jobs.

The same day Federal Reserve bank officials announced they would pump about $200 billion into the banking system in hopes of alleviating a tightening credit crunch.

The February jobs decline brought the official unemployment figure to 7.4 million, or 4.8 percent. While the overall number of jobs fell, the unemployment rate dropped slightly due to some 396,000 people who have given up on finding a job.

The report refers to 1.6 million people as “marginally” attached to the labor force. These are people who have looked for work at some time in the past 12 months. In addition, there are 4.9 million people employed part-time, up 637,000 over the last year.

Unemployment among Blacks, is 75 percent higher than that of whites, at 8.4 percent. Among youth aged 16 to 19, unemployment is 29.5 percent for Blacks and 15.3 percent for whites. The unemployment rate for Latinos overall is 6.9 percent, and for Asians, 3 percent.

In the manufacturing sector, employers cut 52,000 jobs. This brings the total drop in manufacturing jobs to 299,000 over the past 12 months. Construction jobs were cut by 39,000 in February bringing the total jobs lost to 331,000 since the industry’s peak in September 2006.

After months of denying the depth of the financial and economic crisis unfolding in the United States, many financial commentators swung in the other direction after the jobs report was issued.

“Godot has arrived,” wrote Edward Yardeni, a former chief investment strategist for Prudential Equity Group, E.F. Hutton, and Deutsche Bank, who has been among Wall Street’s most optimistic economic forecasters. “We are falling into a consumer-led recession,” Yardeni said. He added that aggressive rate cuts by the Federal Reserve should help the economy rebound in the second half of the year.

Within minutes of the release of the Labor Department’s report, JPMorgan Chase and Lehman Brothers added their voices to those declaring that a recession appears to have begun.

Even though the Federal Reserve sharply cut short-term interest rates twice in January and has signaled that it will do so again at its March 18 meeting, rates for home mortgages and other forms of commercial loans have continued to rise. Capitalists are demanding steep risk premiums as a condition for investment in securities backed by mortgage debt.

In addition, the ratio of homeowners’ equity to the value of their homes fell below 50 percent for the first time in history, according to the Federal Reserve. About 30 percent of all homes bought in 2005 and 2006 have mortgages that are higher than their resale value. Nearly 8 percent of all mortgage loans are past due or in foreclosure, according to a Mortgage Bankers Association report.
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