Dismal news out of the financial sector today, and again, the markets are wondering why the numbers are “worse than expected”.

The big news is the February job numbers, showing 63,000 lost jobs.

U.S. employers cut payrolls for a second straight month during February, slashing 63,000 jobs for the biggest monthly decline in nearly five years as the nation’s labor markets weakened steadily, a government report on Friday showed.

The Labor Department said last month’s cut followed an upwardly revised loss of 22,000 jobs in January rather than the 17,000 reported a month ago. It also said only 41,000 jobs were created in December, half the 82,000 originally reported.

“This confirms the fears that have been lurking in the financial markets in recent weeks. The probability of a U.S. recession is at more than 50 percent,” said Richard DeKaser, chief economist for National City Corp. in Cleveland.

“The Fed has to be more aggressive,” DeKaser added. The U.S. central bank is expected to cut interest rates again later this month and, on Friday just before the payrolls report became public, announced new measures to add liquidity to severely strained credit markets that are near seizing up.

The back-to-back January and February job losses were the first consecutive monthly declines since May and June of 2003.

The February jobs report was more bleak than expected. Economists surveyed by Reuters forecast 25,000 jobs would be added to payrolls last month. They had forecast that the unemployment rate would edge up to 5.0 percent.

Department officials said February’s job losses were the largest for any month since March 2003, when 212,000 jobs were cut.

These job losses are starting to pile up, like the numbers we had during 2002 and 2003.  Much like then, we’re starting to see companies fuel their bottom lines by tossing workers into the furnace to keep the economy moving.  The Bush Boom of 2003 resulted in the loss of millions of jobs, the so called “jobless recovery” the country had after 9/11.  Those jobs have slowly been replaced of course, but they were replaced with temp positions, low paying service jobs with no benefits, and seasonal work.  The largest overhead for any company these days is labor cost.  Get rid of worker costs, get rid of workers in the name of “productivity” and you can save money.

Now we’re starting to see those low-paying bare bones jobs sacrificed to keep the economy moving.

Meanwhile the Fed is dumping $100 billion dollars into banks in order to bail them out.

The Federal Reserve plans to increase its loans to banks this month to offset a deepening credit crisis threatening to tip the U.S. economy into a recession.

The central bank increased to $50 billion each from $30 billion the amount intended for auctions of funds planned for March 10 and March 24. The Fed also said in a statement in Washington today that it will make $100 billion available through weekly 28-day repurchase agreements, where the central bank lends cash in return for assets such as Treasuries.

The decision is the central bank’s latest attempt to reduce the threat to the economy from banks curtailing loans to companies and households. Banks and securities firms have posted losses exceeding $181 billion since the start of last year as the impact of surging defaults on subprime mortgages rippled through world financial markets.

“Given what we have seen in terms of illiquidity in the financial markets in the last four or five days, this came right in time,” Ajay Rajadhyaksha, head of fixed income strategy at Barclays Capital in New York, said in an interview with Bloomberg Television.

Sure, discount Fed cash is always fun.  Banks lose $181 billion so far, and the Fed’s putting it right back all quiet-like.

Traders increased bets that the Fed will lower its benchmark interest rate by at least three quarters of a point this month after a government report showed the biggest job loss in five years, adding to evidence the economy is contracting. Odds of a full percentage-point reduction, to 2 percent, jumped to 26 percent from zero yesterday, futures prices showed.

A 75 or 100 basis point cut is almost certain now.  Guess what that will do to the already free-falling dollar?  There’s only 300 basis points total left to cut before we hit zero.  Cuts are not working.  Inflation is going to go berserk.  The Fed is damned if they do cut, and damned if they don’t cut…and so are we.

Meanwhile Congress is making noises about mortgage execs getting millions in bonuses.

U.S. House lawmakers criticized Wall Street executives today for receiving hundreds of millions of dollars in compensation while shareholders took the brunt of billions in writedowns from subprime mortgages.

“There seem to be two different economic realities operating in our country,” said Henry Waxman, a California Democrat and chairman of the House Oversight and Government Reform Committee. “Most Americans live in a world where economic security is precarious. But our nation’s top executives seem to live by a separate set of rules.”

Waxman’s committee will question former Chief Executive Officers Charles Prince of Citigroup Inc. and Stan O’Neal of Merrill Lynch & Co., and current CEO Angelo Mozilo of Countrywide Financial Corp.

Countrywide has lost 86 percent of its value in the past year as subprime borrower defaults triggered a surge in foreclosures. The largest U.S. mortgage lender also lost $422 million in the fourth quarter, failing on its promise to return to profitability. Bank of America Corp. said in January it would acquire Countrywide for about $4 billion in stock.

Mozilo agreed to give up $37.5 million of severance and consulting pay in connection with Bank of America’s proposed takeover of Countrywide. He earned $121.7 million last year selling the lender’s shares, according to company filings.

In prepared remarks, Mozilo defended Countrywide’s pay practices, saying the board “adopted a compensation policy that aligns the interests of top executives with shareholders by making compensation largely performance-based.”

Performance-based, indeed.  What performance we’ve gotten out of these executives, losing 80% of their stock value, cutting thousands of jobs, and putting thousands of homeowners into a massive economy-crushing tailspin of negative equity.

But they alone cannot be blamed…without their enablers in the Fed and the Bush Treasury department, without the lack of oversight from Congress, without the FEC rulings and complete lack of regulatory integrity, this could have actually been avoided.

But people were making billions.  And integrity vanishes when there are twelve digits involved.

You’re going to see a lot more disappear over the next year.

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