Employers slash jobs by most in 5 years

“The debate should no longer be about whether there is or is not a recession, only about how deep it will be,” said Nigel Gault, chief economist at Global Insight.

The elimination of 63,000 jobs in February was the most since March 2003 and marked the second month in a row of job losses. The last time the economy suffered two consecutive months of job losses was in May and June 2003, when the labor market was still struggling to recover from the blows of the 2001 recession.

“Businesses got cold feet, and when that happens the easiest thing to do is to put hiring on hold and wait until the dust clears,” said Ken Mayland, economist at ClearView Economics.

Economic growth slowed to a near standstill of just a 0.6 percent pace in the final quarter of last year. Before Friday’s employment report, many thought growth would weaken further — around a 0.4 percent pace. Now, however, a growing number think the economy is contracting.

Bush’s top economic adviser, Edward Lazear, acknowledged Friday that the economy may dip into negative territory in the current quarter. Lazear’s comment was the most pessimistic assessment heard out of the White House. He would not discuss whether the White House believes the economy will actually fall into a recession.

The Bush administration was hoping the government’s speedily enacted economic stimulus package — including tax rebates for people and tax breaks for businesses — will help bolster the economy in the second half of this year.

“I know this is a difficult time for our economy, but we recognized the problem early and provided the economy with a booster shot,” Bush said. “We will begin to see the impact over the coming months,” the president predicted.

Democrats, however, said more relief is needed now.

Video   Report: 63,000 jobs lost in February March 7: U.S. employers slash jobs by 63,000 in February, the most in five years. NBC's Jennifer Johnson reports. NBC News Channel

House Speaker Nancy Pelosi, D-Calif., spoke of charting a “new direction for our economy.” Rep. Barney Frank of Massachusetts, chairman of the House Financial Services Committee, called for action to stem record-high home foreclosures.

The Democratic presidential contenders, Sens. Hillary Rodham Clinton of New York and Barack Obama of Illinois, blamed the job losses on what they believe are failed Bush policies. “The news should put to rest any doubts that our economy is in deep trouble,” Clinton said. Obama said the employment news meant “more heartache and struggle” for Americans.

On the employment front, workers with jobs saw modest wage gains.

Average hourly earnings for jobholders rose to $17.80 in February, a 0.3 percent increase from the previous month. Over the last 12 months, wages were up 3.7 percent. With lofty energy and food prices, though, workers may feel like their paychecks are shrinking.

Spreading fallout from the housing and credit troubles are the main factors behind the economic slowdown. People and businesses alike are feeling the strains and have turned cautious. Adding to the stresses on pocketbooks, budgets and the economy: skyrocketing energy prices. Oil prices, which have set a string of record highs in recent days, now top $105 a barrel. Gasoline prices have marched higher, too.

All those problems are putting consumers in a gloomy state of mind.

Consumer confidence sank to a new low of 33.1 in early March, according to the RBC Cash Index. That was the worst since the index began in 2002.

To help shore up the economy, Federal Reserve Chairman Ben Bernanke signaled last week that the central bank is prepared to lower interest rates again. Economists are now predicting a deep rate reduction by the Fed on or before its regularly scheduled meeting March 18. The Fed, which has been slicing the rate since September, recently turned more forceful. It slashed the rate by 1.25 percentage points during just eight days in January — the biggest one-month reduction in a quarter-century.

MORE FROM STOCKS & ECONOMY

Stocks & economy Section Front

Stocks end big day at highs for the year Oil prices top $80 as dollar weighs on markets Aging bull? Stocks may be in for rough ride Wall Street awaits stores’ reports this week Cost of gas nudges up 2 cents in last two weeks Jobless: 10 percent is tougher than it used to be Easing job losses point to wobbly recovery Unemployment rate rises above 10 percent When unemployment last topped 10 percent Obama signs homebuyer, jobless bill assistance Stocks & economy Section Front   Add Stocks & economy headlines to your news reader: