The US continued to lose jobs last month, signalling that the economy is either enduring its weakest recovery since the second World War or still in outright recession.
The second month of huge job losses will test the US Federal Reserve's patience and may make an interest rate cut more likely in coming months, but probably not before the Fed's next policy meeting in May.
The US Labor Department reported yesterday that payrolls outside farming fell by a seasonally adjusted 108,000 in March. It was the fifth fall in seven months and worse than the forecast 30,000. It followed February's 357,000 plunge, a figure revised up from an estimate of 308,000.
The unemployment rate, based on a survey of households, remained steady at 5.8 per cent because many people abandoned the search for work, meaning they are not counted as unemployed. Only 62.3 per cent of the US population was employed in March, a nine-year low.
"It's a particularly weak number, but all of them have been particularly weak lately and the Fed hasn't shown any inclination to move," said ABN Amro chief economist Mr Steve Ricchiuto.
BMO Financial Group economist Mr Sal Guatieri said: "We definitely need to see a conclusion to the conflict to see a revival of the US economy."
However, a growing number of economists believe it was not just the build-up to war that held back the economy in recent months, but more lingering problems of excess capacity and accounting scandals that dampened sentiment.
Equity markets were generally flat following the report, capping a sharp rally over the week. The bad news on employment offset optimism over military successes in Iraq.
The advance to Baghdad caused gold and oil prices to tumble. Gold fell 4.5 per cent on the week to near a four-month low of $322.75 an ounce before recovering in afternoon trading. By late afternoon, Brent crude had fallen 77 US cents to $24.73 a barrel, making it a decline of more than 6 per cent in the week.
The run of job losses has added to speculation about the economy's travails. Employment generally lags behind recovery in demand, and job losses have given way to robust expansions in the past. However, the job losses in this recovery have surpassed, in size and duration, those of previous post-recession periods, including the "jobless recovery" after the 1990-91 recession.
"The current jobless recovery has now lasted longer and is far worse," said Mr Charles McMillion, chief economist of MBG Information Services in Washington.
Partly because of that, an end to the recession that began in 2001 has yet to be declared. This could, therefore, end up as the longest recession since 1885.
Traders in futures markets have been speculating on or hedging against the possibility that the US economy remains sick. For the first time, futures markets this week began pricing in a rate cut of a quarter point by September as a certainty.
