63000 jobs cut fed fund rates cut 75 basis points too

The February jobs report came in remarkably weaker than expected by dropping another 63,000, causing the Fed to aggressively cut the federal funds rate by 75 basis points. February’s decline in payroll jobs, the largest such decrease since a colossal 212,000 fall in March 2003, was notably worse than the consensus projection for a 25,000 rebound and mar ked a third consecutive month of decline.

Exacerbating the situation, not only did February come in weak, but the prior two months were also revised down. The initial January estimate of a 17,000 drop was revised down 5,000, while December was revised down 41,000 from the previous estimate of an 82,000 increase. For Janu ary and December combined, the net revision was down 46,000, indicative of a very clear downward path. February also marked a full year of payroll survey weakness in the goods-producing sectors, with both construction and manufacturing entering its 21st consecutive monthly decline.
Several key factors are thought to have influenced the February NFP report.

They include:
* Government payroll expected to add just 15K to March payrolls
* Private service providing payrolls expected to edge just -5K lower, from -12K in February and a 100K average in Q4

Unemployment rate expected to rebound to 4.9% following December’s 5% high
For week ending March 29, 2008, the Department of Labor reported that the advance figure for seasonally adjusted initial claims was 407,000, an increase of 38,000 from the previous week’s revised figure of 369,000. They also reported a four-week moving average of 374,500, a n increase of 15,750 from the previous week’s revised average of 358,750.
The back-to-back payroll declines that started 2008 is disturbing for the economy as the weaker growth has become more broad-based and trend like. Payrolls have shown weaker growth for four months from a 140K gain in October. Unemployment is rising from the March low of 4.4% but fell to 4.8% in February after reaching 5% in December. Employment trends lag the economy as final demand—in excess of labor productivity—feeds in to labor demand. Earnings growth is fading and stands at 3.7% compared to the 4.3% yoy high of late 2006. The loosening labor market is being watched for signs of unraveling—which many analysts will say has arrived in the payroll data.

What is the non-farm payroll report?
Of all the world monthly economic reports, the monthly US NFP report is the most highly anticipated and has the most dramatic impact on the currency market.
The report, which is released on the first Friday of each month and states the previous month’s numbers, provides detailed industry data on employment, hours and earnings of workers on nonfarm payrolls. These numbers are the best way to gauge the current state of the US market as well as the direction that the economy is heading.

What’s more, the employment numbers provided by the report are used by the Fed to shape their interest rate policies. The health of the US economy and interest rates translate to the strength or weakness of the US dollar.