Sharp plunge in U.S. jobs (Media wishing recession on us alert)

WASHINGTON (CBS.MW) -- The U.S. labor market continued to convulse in March, as 108,000 jobs were destroyed following a loss of 357,000 in February, the Labor Department said Friday.

The nation's unemployment rate remained at 5.8 percent, with 8.45 million Americans officially looking for work.

"Labor market conditions remained sluggish in March," said Kathleen Utgoff, commissioner of the Bureau of Labor Statistics.

Combined with the downward revision to February's payrolls, the job losses over the past two months were about 145,000 worse than expected by Wall Street economists.

A survey of economists estimated, on average, a loss of 17,000 jobs in March. They also expected the jobless rate to rise to 6 percent.

Financial markets largely ignored the jobs report. Stocks opened marginally higher, pressuring bonds. See Market Snapshot and Bond Report.

"No one seems to care much about the lousy U.S. jobs report right now," analysts at Briefing.com said. "We think that could prove to be a costly mistake."

Investors remain focused on the cause of the recent weakening in the economy -- chiefly the war and high energy costs, said Tony Crescenzi, chief market strategist at Miller Tabak. "Developments on these fronts have clearly been very positive of late -- oil is down sharply again today, for example."

The jobs report continues a string of worse-than-expected economic reports in the past week that is trying the patience of the Federal Reserve.

On Tuesday, the Institute for Supply Management said its manufacturing index fell to 46.2 percent, the first sign of contraction in the factory sector in five months.

The Fed has expected the economy to improve once the war in Iraq is concluded, but the data have been weak enough in the months and weeks leading up to the war to make Fed policy makers nervous about the strength of any postwar bounce.

The Fed's interest rate target remains at a four-decade low of 1.25 percent. The Fed will be able to look at one more labor market report before the May 6 meeting of the Federal Open Market Committee.

"Cutting rates further will not stimulate spending as long the war continues," said Brian Bruce, director of PanAgora Asset Management. "Cutting rates will do nothing to change the psychology of corporations at this point."

However, Lehman Brothers' economists "continue to expect the Fed to be forced to cut rates further, with the odds continuing to favor an intermeeting move," said Drew Matus, an economist at Lehman.

"This news only serves to underscore the need for Congress to pass the president's growth package as soon as possible to ensure that every American who wants a job can find one," said Labor Secretary Elaine Chao.

"Despite these appalling economic conditions, President Bush is proposing more of the same -- massive tax cuts that largely benefit the wealthy," said House Democratic Leader Nancy Pelosi of California. "The administration has put forward this plan even though their own economic advisers say it won't create enough jobs to make up for those lost in the past two months, let alone the past two years."

Average hourly wages rose 0.1 percent to $15.10. The aggregate number of hours worked in the economy rose 0.3 percent as the average work week rose by 12 minutes to 34.3 hours.

Job losses were widespread throughout most sectors of the economy in March. Since the recession began two years ago, 2.1 million jobs have been lost.

Goods-producing industries cut 14,000 jobs in March, including 36,000 in manufacturing. No major manufacturing sector added workers. Construction added 21,000 jobs, a bounce back from February's weather-related losses of 42,000 jobs.

Service-producing industries cut 94,000 jobs. Retail firms sliced 43,000 workers, bringing the total lost since June 2001 to 470,000. Government cut 40,000 jobs, most were in local education.

Temporary help firms cut 48,000 workers in March, the largest decline since September. Temp jobs are often the first to be added and the first to be lost in today's flexible workplace. More than a half million temp jobs have been lost in the recession.

Transportation lost 14,000 workers in March, bringing the loss since January 2001 to 301,000. Half of those jobs were at airlines.

The jobless rate remained at 5.8 percent because 267,000 Americans dropped out of the labor force. Nearly a million Americans dropped out in the first quarter.

"The jobless rate failed to rise only because many unemployed workers stopped actively looking for jobs (a necessary condition to be included in the Labor Department's official labor force count)," said Jade Zelnik, chief economist at RBS Greenwich Capital. "This leaves little doubt that the underlying trend for joblessness is still upward."

More troubling, the number of Americans who currently want a job but are not actively looking because they are discouraged jumped by 558,000 in March to 5.02 million.

Where is everybody? Lack of customers crippling city's economy

New Yorkers say these are the worst of all times for the city's economy.

Already reeling in the aftermath of the Sept. 11, 2001, terrorist attacks, businesses are taking more brutal hits from the war in Iraq, the hangover from a snowy winter and the city's budget crisis.

Potential customers are staying home in droves and anxiously keeping an eye on their wallets, which has led to empty stores - and even parking spots - from SoHo to the South Bronx.

"Look around - the business is dead," said salesclerk Goppe Doucouri in an empty clothing store in Brooklyn's Fulton Mall. "People check things out but they don't buy. They say they're saving because of the war."

Luther Bradley recalls when 80 cars would be parked on a spring weekend in the garage he manages on Bleecker St. in Greenwich Village. There were just 30 there last Saturday.

"People are afraid to spend money because they don't know what way the economy is going to go," said Bradley, 55, of the Bronx. "The Village is a tourist area. Now who comes to the Village?"

Even before coalition troops poured into Iraq last month, statistics were painting a stunning portrait of economic dislocation in New York.

The city has lost 223,000 jobs in the past two years in a deepening slump that has affected all economic levels.

Eating away at business

Local unemployment last month stood at a five-year high of 8.6%; Wall St. bonuses were slashed by nearly a third, and applications for food stamps jumped by 20% in the past year.

But the war has piled new worries on ailing businesses as customers focus on TV updates and jittery tourists stay home.

In the Theater District, Peter Chimos said crowds have been thin for weeks at his Frankie & Johnnie's steakhouse ever since snowstorms ruined weekends.

It's the same story downtown at the Grange Hall restaurant on a cobblestone street in the West Village, where the city's new smoking ban also has eaten away at bar business.

"People are going out less and saving their money," said owner Jaqui Smith, 48.

Even the hot dog business is bad. Just ask vendor Abdalla Ibrahim, 28, who is working extra hours to squeeze a few bucks out of the sparse streets.

"My mind is, like, crazy," Ibrahim said.

With its Greek cafes, family-owned furniture stores and a sprinkling of chain stores such as The Gap and Foot Locker, Steinway St. in Astoria, Queens, might seem like a candidate to weather the downturn.

But business is plunging from 20% to 50% - and even longtime business owners say they don't know how long they can keep on bleeding money.

"This is the worst it's ever been," said Mohamed el-Shenawi, 44, owner of Classic Design, an antique furniture store. "It's been a solid recession."

The Hub, the commercial heart of the South Bronx, is usually a bustling hive of double-parked cars and crowded sidewalks on weekends.

Spring should be especially busy as families shop for Easter outfits and young people think about proms and parties.

But yesterday, you could drive right up and park in front of the racks of marked-down hip-hugger jeans and two-for-one leather jackets at Younger Girl on E. 149th St.

Dip forces layoffs

"After Sept. 11, business dropped a little. And now, with the war, it got worse," said manager Ahmed Jesse, 25.

At the Fulton Mall, Amy Kaur let go one of two helpers at her hat and scarf kiosk.

"This is the worst," said Kaur, 22.

One business that is booming in bad times is the Bazaar Gold Mine pawnshop. A steady stream of customers pours in, looking to dump Rolex watches and gold chains.

"Since the war started, it's been better than usual," said the owner's son, who gave his name as Lenny. "Everybody wants to trade in their stuff for cash."

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