3/7/2008 9:32:25 AM Employment unexpectedly fell for the second consecutive month in February, according to a report released by the Labor Department on Friday, with employment falling at the fastest rate in almost five years.

The report showed that non-farm payroll employment fell by 63,000 jobs in February following a revised decrease of 22,000 jobs in January. The drop in employment marked the biggest decrease in jobs since March of 2003.

On average, economists had been expecting employment to increase by about 25,000 jobs, although there had been a wide range of estimates.

The unexpected drop in employment reflected weakness in the goods-producing sector, which lost a total of 89,000 jobs.

Notable decreases in both construction and manufacturing jobs contributed to the weakness in the goods-producing sector. The report showed that construction employment fell by 39,000 jobs, while manufacturing employment fell by 52,000 jobs.

Employment in the service sector increased by a modest 26,000 jobs, as decreases in retail and business services jobs partly offset increases in education and health services, leisure and hospitality, and government jobs.

At the same time, the report showed that the unemployment rate edged down to 4.8 percent in February from 4.9 percent in January. The decrease came as a surprise to economists, who had expected the unemployment to increase to 5.0 percent.

However, the drop in the unemployment rate came as hundreds of thousands of people left the civilian labor force.

The report also showed that average hourly earnings increased by $0.05 or 0.3 percent to $17.80 following an increase of $0.05 in January. On a year-over-year basis, average hourly earnings were up 3.7 percent.

The disappointing employment data is likely to add to recent concerns about the possibility that the U.S. is already experiencing a recession. On the other hand, the data is likely to add to expectations that the Federal Reserve will continue to cut interest rates.

The Federal Reserve has made a series of rate rates in an effort to help the economy avoid a recession, while the White House and Congress have also pitched in by speedily passing an economic stimulus package.

Nonetheless, while U.S. gross domestic product has yet to show even one quarter of contraction, many analysts believe that the U.S. economic is already in a recession, which is technically characterized as two quarters of GDP contraction