By BRIAN BLACKSTONE
WASHINGTON -- A third-straight sharp drop in U.S. payrolls confirmed Federal Reserve Chairman Ben Bernanke's recent warning that the U.S. economy may be in recession, as the unemployment rate moved sharply higher.
The data suggest additional interest rate cuts by the Fed are likely, even though the already-aggressive response by officials doesn't leave them too much room for additional easing.
Nonfarm payrolls fell 80,000 in March, the Labor Department said Friday, its biggest decline in five years, after falling by 76,000 in both January and February. Both were revised to show even bigger losses.
Had it not been for a rise in government jobs last month, payrolls would have fallen by around 100,000.
The unemployment rate, which is calculated using a separate survey of households, jumped 0.3 percentage point to 5.1%, the highest since September 2005, when it was also 5.1%.
The softness in March payroll employment was relatively broad based across industry classifications with the biggest losses coming from sectors such as construction, manufacturing, and temporary help. Within construction, the bulk of the job loss continues to be tied to the fall-off in homebuilding but we are also beginning to see some significant weakness in nonresidential workers. –David Greenlaw, Morgan Stanley
Interestingly, job losses in the construction sector were nearly evenly split between residential and commercial and suggest that issues in the real estate sector are spreading beyond housing… One noticeable trend is that while the pattern of large job cuts is unchanged, the diffusion index of industries creating jobs continues to fall… The spread of labor market weakness bolsters the case for a recession this year and is among the most troubling aspects of the report. –Drew Matus, Lehman Brothers