Economic Data Piling On in Favor of Recession

The last remaining positive sign that the U.S. economy would not slip into recession in 2008 turned negative Friday morning when the U.S. Labor Department reported that the country lost 63,000 non-farm jobs in February.

The closely-watched jobs report had been dipping lower since November, and in January reported a loss of 17,000 jobs. But economists felt that February’s numbers would rebound to show a consensus estimate gain of 20,000 jobs. The job loss for February was the largest since March 2003. The only sector that added jobs was government, which added 38,000. The private sector lost 101,000 jobs in the month.

Labor also revised lower the jobs numbers for January and December. The new numbers show a loss of 22,000 jobs in January and a gain of 41,000 for December, down from the originally-reported gain of 80,000.

Still, Labor reported that the overall unemployment rate fell to 4.8 percent from 4.9 percent in January as the labor pool was reduced by the largest number in more than five years, 450,000, due to retirement and workers ceasing their job searches.

The jobs report came on the heels of three separate items on Thursday that spoke to the growing trouble in the consumer credit market.

In a question and answer session after a speech in Massachusetts Thursday, Federal Reserve Bank of Boston President Eric Rosengren said that credit card delinquencies are rising as homeowners struggle to keep their mortgages current. "It is nowhere near what we are seeing in the housing market but credit card delinquencies are starting to tick up especially in areas where foreclosures are heavy," Rosengren said.

Echoing the problems facing homowners, the Mortgage Bankers Association said Thursday that home foreclosures reached an all-time record in the fourth quarter of 2007. The group also said the mortgage delinquency rate hit its highest reading in Q4 since 1985.

Also on Thursday, the Federal Reserve said that homeowner equity dropped to the lowest level in the U.S. since World War II. The Fed reported in its quarterly Flow of Funds Accounts report that homeowner equity slipped to 47.9 percent in the fourth quarter of 2007. The drop marks the first time that debt was higher than equity in U.S. home ownership.

The total value of home equity also fell for the third straight quarter to $9.65 trillion. The Fed blamed the drop on a sharp decline in home values following the collapse of the housing market last year.