Economists React: Payrolls at ‘Recessionary Levels’

Economists and others weigh in on the the weaker-than-expected employment report.

Private payroll growth has now been negative for three months in a row (including a very sharp 101,000 drop in February). These payroll changes are at recessionary levels. –Drew Matus, Lehman Brothers

Back-to-back nonfarm payroll declines and three consecutive private payroll contractions are a strong indication that the economy has fallen into recession. The decline in the unemployment rate does not conflict with this message because it is a result of reduced labor force participation (less willingness to look for a job), which likely reflects a deteriorating assessment of the labor market (as supported by the Conference Board’s consumer confidence survey). –Bear Stearns

As for the decline in the unemployment rate, don't get too excited about that either. There was a huge drop in the labor force. With all the news about a recession, people may be giving up looking for work. As far as the government is concerned, if you are not an active participant in the labor market, you are not counted as unemployed. –Naroff Economic Advisors

The February employment report was dismal. We have been saying that the labor market data has been weakening but had not yet gotten to a recessionary tenor. Well, this was a recessionary type number… Ironically, most of the data this week were mildly encouraging, in that, while they were weak in an absolute sense, they did not show a downward spiral in activity from January to February (whereas much of the December and January data were disastrous). Today’s report is obviously a very important departure from that pattern, but we are still not sure that GDP will contract meaningfully in the first half of the year. –Stephen Stanley, RBS Greenwich Capital

The debate should no longer be about whether there is or is not a recession, only about how deep it will be. –Nigel Gault, Global Insight

Making a bad situation worse is the downward revisions in the January data to -22,000 and the December data to +41,000, down from -17,000 and +82,000 respectively, make it clear that the since November 2007 the economy is but a rounding error away from negative growth and we think that is exactly what the market will observe in the first quarter… Turn out the lights the parties over. We are in a recession –Joseph Brusuelas, IDEAglobal

A terrible report. No support at all now for consumer spending growth. –Joshua Shapiro, MFR, Inc.

Weekly jobless claims do not suggest heavy layoffs and indeed other collaborating data (JOLTS and Challenger surveys) do not suggest heavy layoffs. The more pronounced trend in this cycle is the lack of hiring in many industries. Weak hiring implies that those who are laid off will have greater difficulty finding jobs. The unemployment rate rose earlier in this economic slump than in previous cycles because hiring did not keep pace with labor market growth. –Societe Generale

The most pressing sign of recession spreading into noncyclical areas was the decline in private service jobs, which fell for the first time in five years. Some were expected for example in retail and wholesale trade jobs a reflection of decreasing sales and in finance. But the number of temporary jobs lost in business services was the real signal of cyclical spread. –Brian Fabbri, BNP Paribas

Education and leisure together rose 51,000, so core private jobs fell by a huge 152,000. In mitigation, weather effects seem to have accounted for perhaps more than 100,000 of this, but the underlying trends are horrible, with worse to come. The Fed has to ease much more. –Ian Shepherdson, High Frequency Economics

Weather conditions did not really appear to be an important factor in the February employment report. The "not at work due to bad weather" measure — our favorite proxy for weather-related influences on the employment data — came at 316,000, which was virtually unchanged from January and relatively close to expectations. –David Greenlaw, Morgan Stanley

Compiled by Phil Izzo

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