WASHINGTON (Reuters) - U.S. employers cut payrolls for the first time in 4-1/2 years in January, the Labor Department said on Friday in a report that showed the slowing economy was at growing risk of sliding into recession.
A separate report showing a modest revival in manufacturing at the beginning of 2008 took some sting out of the jobs loss but financial market participants were betting the Federal Reserve will have to keep cutting interest rates.
A series of contrasting reports whipsawed financial markets, leaving stock prices basically unchanged in early afternoon trading and bond prices mixed. The dollar recovered earlier losses to show modest gains against the euro.
Uncertainty about U.S. economic prospects was widespread.
"The economy is very weak. It's on the edge of recession but the data are mixed enough so that you can't say a recession has begun," said Stuart Hoffman, chief economist for PNC Financial Services in Pittsburgh. "It's hanging by a thread but it hasn't been cut yet."
President George W. Bush acknowledged to a Kansas City, Missouri, audience there were "troubling signs, serious signs that the economy is weakening" and said Congress should speed up work on fiscal measures to get tax rebates to consumers.
Some 17,000 jobs were cut last month, sharply contrary to Wall Street analysts' forecasts that 80,000 would be created. December's new-job total was revised up to 82,000 from 18,000 but October and November gains were revised lower.
At midmorning, the Institute for Supply Management said its index of national factory activity rose to 50.7 in January from 48.4 in December, a sign of expansion. Consumer sentiment also rose, according to a Reuters/University of Michigan Survey, though not as much as had been forecast.