Friday's announcement from the Bureau of Labor that nonfarm payrolls declined by 63,000 in February is an ominous sign. The decline in jobs is the biggest since March 2003. Analysts surveyed had expected payrolls to grow by 25,000, versus a loss of 17,000 jobs in January.
The U.S. unemployment figure actually edged down, to 4.8%, from 4.9% a month earlier. Wall Street economists surveyed by Thomson had predicted the unemployment rate would rise to 5.0% in February.
Bond prices spiked in reaction to the news. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell to 3.51%, from 3.59% late Thursday.
On Friday the Federal Reserve announced a big expansion of its face-saving term auction facility for banks. Banks are shunned in the markets when they admit they need an emergency loan, so capital-short U.S. banks must have breathed a sigh of relief. Increasing the rescue government loan program to banks suggests the Fed sees rough times ahead.
Under the term auction facility, the Federal Reserve auctions loans to banks. All depositary institutions that are eligible to borrow under the primary credit program are eligible. All auctioned term notes require collateral.
The dollar fell to record lows versus the euro and several other currencies Friday after the Labor Department's February announcement. The euro was last trading at $1.544, compared with $1.543 before the report. The dollar also fell to an eight-year low of 101.44 against the yen and to an all-time low of 1.0138 Swiss francs.
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