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US sees job cuts for second month US sees job cuts for second month
(about 2 hours later)
US employers cut 63,000 jobs from their payrolls in February, much more than expected, Labor Department figures showed. US employers cut 63,000 jobs from their payrolls in February, the biggest decline since March 2003, Labor Department figures showed.
The decline last month underscores the effect the housing and lending crisis is having on US firms, which were forced to cut 22,000 jobs in January. The decline last month underscores the effect the housing and lending crisis is having on US firms and follows 22,000 job cuts in January.
The biggest employment declines were seen in the manufacturing, construction and retail sectors. Analysts had been expecting the US economy to create jobs in February and the fall will heighten recession fears.
Those areas of the economy have been hardest hit by the slowdown. Manufacturing, construction and retail were hardest hit by job losses.
The figures also showed the unemployment rate fell to 4.8% from 4.9%, when analysts had been expecting a rise to 5%. A decline of that magnitude screams recession Paul Ashworth, Capital Economics.
The fall came as a result of people giving up on looking for a job, discouraged by their prospects. The cuts swamped job creation elsewhere, including in education and health care, leisure and hospitality and by the government.
"This employment report removes all doubt that the economy has slipped into a recession," said Jane Caron, chief economic strategist, Dwight Asset Management. Analysts highlighted that without a 38,000 increase in government jobs, the figures for February would have been even worse.
"The most striking figure in the whole report is that private sector payrolls shrank by 101,000 last month compared to a modest 26,000 drop in January," said Paul Ashworth at Capital Economics.
"A decline of that magnitude screams recession."
Bleak picture
Despite the drop in payroll employment, the unemployment rate fell to 4.8%, from 4.9%.
The discrepancy results from the way the figures are calculated - 450,000 job seekers stopped looking for employment, so are not included in the calculation of the unemployment rate.
Minutes before the report was released, the US Federal Reserve announced plans to provide some relief to the strained credit markets, making more money available to commercial lenders at its auctions.
The Fed said it will increase the amount of loans it will auction to banks on March 10 and March 24 to $50bn (£24.7bn), up from the $30bn originally planned.
Analysts think the Fed will also have to continue with aggressive interest rate cuts.
The next interest rate meeting is on 18 March and some economists say policy makers will lower interest rates to below the current level of 3%.
"The Fed is going to ease monetary policy - the question is how often and how fast," said David Resler, chief economist Nomura Securities International.