Interest Rate Roundup

Friday, March 07, 2008

February jobs data looks grim

Here are the key numbers:

* Nonfarm payrolls dropped by 63,000 in February, versus expectations for a gain of 23,000. January's number was revised down to -22,000 from -17,000, while December's gain was cut to +41,000 from +82,000. The chart above shows the net number of jobs lost or gained each month, going back to early 2000.

* The unemployment rate dipped to 4.8%% from 4.9% in January. That was "better" than the expected 5%. But that's only because the labor force shrunk due to people giving up the hunt for work.

* Average hourly earnings rose 0.3%, in line with estimates and the previous month's rise.

* By industry, construction jobs fell by 39,000 ... manufacturing jobs dropped by 52,000 ... business services employment dipped 20,000 ... and retail trade employment fell by 34,000. The strongest gains were in non-cyclical categories -- government (+38,000) and education and health (+30,000). The private nonfarm diffusion index (which measures how many industries are adding workers vs. cutting them) sank to 45.6 from 46.2 in January.

These numbers are just plain weak, no two ways about it. The net loss of U.S. jobs was the worst for any month since March 2003 (-212,000). The declining diffusion index suggests job losses are being seen in a wider variety of industries. And the growth we are seeing is largely being driven by non-cyclical industries. Is there really any question whether we're in recession anymore? I don't think so.

Early market reaction: The long bond futures are flying, up 1 19/32 at last count. The dollar index is off another 30 ticks (though up slightly from its post-number lows). And stock futures have weakened significantly (down 14.50 on the S&Ps at last count).


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