Payrolls Plunge by 63,000, Biggest Drop in Five Years

U.S. employers cut payrolls for a second straight month during February, slashing 63,000 jobs for the biggest monthly decline in nearly five years as the nation's labor markets weakened steadily, a government report on Friday showed.

The Labor Department said last month's cut followed an upwardly revised loss of 22,000 jobs in January rather than the 17,000 reported a month ago. It also said only 41,000 jobs were created in December, half the 82,000 originally reported.

"This confirms the fears that have been lurking in the financial markets in recent weeks. The probability of a U.S. recession is at more than 50 percent," said Richard DeKaser, chief economist for National City Corp. in Cleveland.

"The Fed has to be more aggressive," DeKaser added. The U.S. central bank is expected to cut interest rates again later this month and, on Friday just before the payrolls report became public, announced new measures to add liquidity to severely strained credit markets that are near seizing up.

U.S. Treasury debt prices shot up in anticipation that the Fed will cut interest rates while stock futures weakened sharply. The dollar's value was at a record low against the euro after the unfavorable employment report was issued.

The back-to-back January and February job losses were the first consecutive monthly declines since May and June of 2003.

The February jobs report was more bleak than expected. Economists surveyed by Reuters forecast 25,000 jobs would be added to payrolls last month. They had forecast that the unemployment rate would edge up to 5.0 percent.

Department officials said February's job losses were the largest for any month since March 2003, when 212,000 jobs were cut.

During February, the national unemployment rate eased to 4.8 percent from 4.9 percent in January, but that was because fewer people were in the labor force. The department said the number of people in the workforce fell by 450,000 in February.

Job losses were widespread. Some 52,000 jobs were lost in the manufacturing industries, the largest decline since July 2003 when 92,000 jobs were cut. Construction businesses eliminated another 39,000 jobs on top of 25,000 that were cut in January, a reflection of the housing industry's deepening woes.

The department said that since the housing boom peaked in September 2006, construction businesses have cut 331,000 jobs.

Retail industries also shed jobs last month, dropping 34,000 people off their payrolls, a possible reflection of concern from businesses that hard-pressed consumers are likely to begin pulling back sharply on spending.

In a statement issued with the monthly jobs data, the commissioner of the Labor department's bureau of labor statistics, Keith Hall, warned that many of this year's job losses may take a long time to come back.

"The increase in unemployment over the past 12 months was concentrated among persons who lost jobs and had no expectation of being recalled," Hall said in remarks prepared for delivery to Congress' Joint Economic Committee.

One bright spot was that the government added 38,000 jobs in February on top of 4,000 new-hires in January. Education and health services businesses added 30,000 new hires in February on top of 49,000 in January.

I used to do college recruiting for one of the (formerly) 'Big 8' accounting firms - this was back in the late 80s. They took those kids fresh out of college and started them on learning the nuts and bolts of accounting - sweatwork - and the kids were weeded out (or left after they passed the exam - needing the requisite hours to take it). The ones that were left were on the track to becoming managers and then partners in the future... I hear all the nuts and bolts gruntwork is now outsourced to India these days...

A lot of lost hands on basic accounting knowledge in our future.

OK so now accounting, IT and manufacturing is something we tell our kids not to pursue due to globalism.

What is never mentioned in these doomist reports (even thought the unemployment rate dropped) is the numbers from the household survey which in not figured into the unemployment rate. Obviously every month more and more people are turning to the internet for jobs. The numbers are rarely mentioned in the media. I’m still trying to figure out why the drop from 4.9 to 4.8 is insignificant because fewer people are in the work force. Of course when the rate goes up do they mention fewer people are in the workforce?

Well, seriously, we are slowing somewhat. It remains to be seen if it is a Big Slowdown or a smaller one. Employers report shutting down jobs, therefore the numbers, but people seem to be getting by, by starting little one-man firms, or entering a ‘grey’ economy — an economy where the numbers are not so easy to measure. Also, many people have very large capital reserves, and can continue to spend and live on that money — and in some cases, that amount of money will hold them up for YEARS of zero employment.

"ever mention"

Because that would destroy the argument propagated by Big Media for the benefit of the Democrat Party that people have no jobs. The true unemployment rate (people not working for any renumeration) is probably under four percent with the internet and people like you starting their own businesses. Remember when the Republican Party is in the White House, America must be made to look like the Great Depression is still in full force.

OK so now accounting, IT and manufacturing is something we tell our kids not to pursue due to globalism.

That's about the size of it.

My two kids in college have lived through what dear old dad has encountered: the average shelf life of a Controller/CFO is now 18-24 months, while the average tenure of two corporate tax departments that I temp'ed at recently is upwards of 15 years.

Due to the continued and increasing complexity of the tax code, it is not likely that these jobs will be outsourced. That's the reason why I'm turning my focus in that direction. Thankfully, I start a new position in 10 days, in a newly established tax department in a multinational company.

I'd be willing to bet that KPMG didn't fare well when they outsourced individual tax return prep to India.

As for my own kids, my daughter is majoring in Hospitality Management (her dream is to have her own sports bar), and my 18 year old son has no clue what he wants to do, other than become an expert at Guitar Hero.

Before I close, do you agree with my assessment of accounting as a future career, colleen? It's still a decent career, but being a CPA doesn't have nearly the cache as it did 10-15 years ago.

My son-in-law was hired the same day he was interviewed as a computer expert in La Crosse. His growing firm is now seeking to expand dramatically. They actually told him to contact anyone he knew with computer expertise to come in for an interview. I believe the unemployment rate in the area is under four percent which is just a little less than the Wisconsin ue rate. Things are sure horrible. (smirk)

When people complain about how horrible things are, I use a simple guide to determine how well Americans are living. I look at the size of their stomachs. From travelling around the country the last six years I would say Americans are still living pretty good. Especially here in Wisconsin where there appears not to have been much stomach shrinkage in the last few years despite THIS HORRIBLE ECONOMY WHERE WE’RE ALL GOING TO DIE!!! Arrrrrrggggggghhh!!

The unemployment rate is set by how many people are unemployed and seeking work. If you are an illegal, your job is measured when you are employed. When you lose it(aka sent home), the job is lost, but not part of the unemployment rate because you are no longer looking for work.

If we had one of the so called "round ups", we could lose 10 million jobs and the unemployment rate wouldn't be affected. In fact, it could decrease because the jobs would have to be filled by Americans on unemployment. Most workers drawing unemployment, however, probably don't want to make beds or wash dishes. The main impact would be the carpenters and bricklayers would get off unemployment and be paid a living wage. Unless High School students get alot more humble, we may have trouble filling the bed makers and dish washer jobs for less than $10 an hour.

I guess I would agree with your assessment of accounting as a career with a caveat -- looks like you have to specialize in something that cannot be offshored/outsourced - as you did. It's the same for IT work, don't know about manufacturing.

'Back in the day' being an accounting major, being in the top 10% of your class, you could pick your firm - they were all after the same students. Being a CPA was kind of like being an FBI agent, so yes, you're right, it did have cache!

I guess all this works for now but I do worry about lost knowledge in the future. There will be a gap - not so many who have worked their way up from mailroom to CEO. I think those days are over.

Thinking longterm, I don't think 'the world is flat' mentality is good for the USA.

My daughter is a nursing major and my son is like your son - kind of clueless at 14. We'd be happy if he showed some handiness - always room for a good plumber or electrician. All I know is he has to have a college education because that's requisite - and hopefully something will jump out at him.

We have a friend who owns a sheetrock business - he learned as a kid when his father started up the business and then he and his brother took it over when the dad died. He hires Americans - pays them $15 to $20 an hour (not get rich money as we live in Ma) but lately he cannot keep up with other sheetrock companies as they are hiring either illegals or new immigrants and paying them $5 - $8 per hour.

I don't know what all this means but globalism definitely has 'moved our cheese' and you can no longer assume you'll be able to make a living at doing sort of the same thing for most of your life - and continuing ed is something that is important (sort of hard to save for lifelong education and save for the kids education as well). OK for chiefs I guess, but the Indians are sure gonna suffer.

Good luck in your new job!

I'm kind of curious as to how offshored/outsourced jobs are measured... for instance, my company recently opened up a building in India and those people will take most of our mid level IT jobs - so the company looks like it is growing because although we (hundreds) are laid off here (spread out over about 10 states, so it is kind of under the radar), they are hiring even more bodies over there (takes about 2 of them to do what 1 of us did but they are a lot cheaper than we are).

Lots of US companies do that -- also, lots of companies lay off but then hire H1Bs - no job loss and in fact, they sometimes lay of 1 US worker and hire a couple of H1Bs - so no job loss and actually, an increase in hiring --- how is that measured?

The economic trouble we are in isn't the normal trouble the average person can see. We are NOT in an economic crisis, we are in a CREDIT crisis. This affects no one, until they try to get a loan. While financial institutions are experiencing projectile vomiting, the average Joe is fat and happy. The weakness in banks may start showing up when a few large ones fold up. The dollar is falling faster than planned, inflation is getting worse, and Bernanke has no more bullets. He is FORCED to lower interest rates to try to keep the plates spinning, but the falling dollar and inflation is tying his hands. We either accept the recession, or have $200 oil and $1500 gold. It won't affect the consumer till much later. The obvious effect would be the consumer collapses and the jobs start to fold.

When do you refuse to buy gas or what luxury to you cut first. A good example is Harley Davidson. They were flying high till things started to tighten. The first thing to go in bad times is a $25k motorcycle. They have fallen from $60+ to $35 in just a few months. We will still buy bread, even for $4 a loaf, but we will look to cut everything else first. When the consumer goes, the economy goes.

Keep your eyes on the plates.

I have to disagree. I worked for 8 years in public practice and now work in industry. Competent accounting personnel are few and far between. Most of the “grunt work” has indeed been automated, but the need for people who can think and apply accounting principles to real world situations is very real. As standards get more and more complex, this will only become more and more of an issue. This combined with SOX and increasing importance put on accounting and controls in general tells me there is a great future for bright young people to go into accounting.

I've been out of the accounting world for so long that I really have no idea how the recruiting process is going these days.

I guess my question is, ok, the grunt work is gone but to get to the point where you can apply accounting situations in the real world, don't you have to start out with the grunt work -- I recall these kids going out to firms and doing paper and pencil auditing/accounting work (grunt work) just so they could progress to the point where they could apply what they learned in school to the real world. Where do you get that experience now?

SOX... kill me... I'm in IT (for a little while longer anyhow!).

I think the ticket is specialization and knowing that you will be going to school off and on for the rest of your working days.

I'm certainly no expert bureaucrat, but as far as I know, the simple explanation is we count jobs HERE. If your job is outsourced, It will be counted as a lost job. The person that lost his job is counted as unemployed UNLESS he retires, doesn't file for unemployment, starts his own business, etc. The unemployment rate comes from,( as far as I know), the ratio between filers vs known jobs.

If a company sends it to India, the job is closed here, but the fired guy is counted as unemployed. The rate goes up. Your jobless people will be counted and make a difference even though it's over a 10 state area. The H1B’s,....you got me, I don't know. I can't figure we would import a worker, and then count him as unemployed if he is hired or fired. If we import an H1B, and then his job moves, is he allowed to draw unemployment, or is he sent home? The job he took was here before, but we just hired outside the US pool. I'm just not sure about that one.

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