Bush admits slowdown as Americans lose 63,000 jobs

March 8th, 2008 - 10:45 am ICT by admin  

By Arun Kumar
Washington, March 8 (IANS) President George Bush acknowledged “our economy has slowed” as American employers slashed 63,000 jobs in February, the most in last five years, but claimed a stimulus package could help stem the tide. “Losing a job is painful and I know Americans are concerned about our economy. So am I,” Bush said. “I know this is a difficult time for our economy. But we recognised the problem early and we provided the economy with a booster shot.”

The stimulus package that US Congress passed this year will send tax rebates to American taxpayers by spring, and Bush urged them not to save it. “When the money reaches the American people, we expect it to boost consumer spending,” he said.

A Labour Department report Friday said the US economy lost jobs in February for a second month running and at its fastest pace in five years, making it all the more certain that the nation is slipping into a recession. At 63,000 the job losses in February were nearly thrice as many as a downwardly revised 22,000 the previous month.

Although the unemployment rate declined a tenth of a point to 4.8 percent, that was the result of so many people giving up and leaving the labour force, rather than a sign of economic strength, the department said.

Separately, the Federal Reserve, the central banking system of the US concerned about another round of financial market freeze-ups, announced it will boost loans to the nation’s banks. The central bank will do so in two auctions this month raising the loans from $30 billion to $50 billion per auction, and will buy up $100 billion of mostly troubled mortgage-backed securities.

Stocks fell on the news. The Dow Jones industrial average lost 146.70 points to close at 11,893.69. The Nasdaq composite index dropped to 2,212.49, down 8.01 points. And the Standard & Poor’s 500-stock index shed 10.97 points, closing at 1,293.37.

“The world is coming to an end. Yes, you can quote me on that,” David M. Jones, chief economist with Investors Security Trust in Fort Myers, Florida said. “The payroll numbers were a surprising large drop, and just as important is the fact that we had a larger revised decline in January.”

“You almost never have back-to-back payroll declines without a recession,” he told the Los Angeles Times.

The job losses cut across a wide swath of the economy, including manufacturing (down 52,000 for the month), construction (down 39,000) and retail trade (down 20,000). Temporary help services, a category that often signals which way employment is headed, dropped by 28,000.

The losses were only partially compensated for by increased hiring by government (up 38,000), educational and health services establishments (up 30,000) and leisure and hospitality businesses (up 21,000).

Average hourly earnings for workers who had jobs rose 5 cents, or 0.3 percent, in February to $17.80. Over the last year, hourly earnings are up 3.7 percent, the Labour Department said.

The latest employment report seems certain to further discourage Americans who are already telling pollsters that they are pessimistic about the economy’s prospects, and therefore less likely to buy, the Times said.

That, in turn, is likely to force the the central bank’s policy-making Federal Open Market Committee to keep cutting interest rates to boost the economy, although it may also increase inflation.

Senior central bank officials said in a Friday background briefing for reporters that the central bank was not acting because of the discouraging employment report but because of renewed signs of trouble in the nation’s financial markets.

The Fed as the central bank is called, has been struggling since last August with how to arrest a seemingly widening credit crunch in which banks don’t want to make loans and investors are refusing to buy any but the most secure securities, making it increasingly hard for the economy to function.

Banks and financial firms have announced roughly $200 billion in losses since the start of last year as the effects of the sub-prime mortgage market have spread through US and world financial markets.

On Capitol Hill, Senate Majority Leader Harry M. Reid said that the economy is “spiralling downward every day,” and that the tax rebate checks are unlikely to turn things around. He urged the administration and congressional Republicans to support legislation introduced by Democrats last week to respond to the nation’s housing crisis.

He said the administration’s voluntary programme to encourage banks to work with homeowners facing foreclosure has been largely ineffective and amounts to “merely a drop in the bucket.”

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