"Joblessness soared and employers cut back in March, the deepest job losses in five years and strong evidence that the housing and financial market distress has spooked employers.

The Labor Department numbers released yesterday were far worse than economists had forecast. The unemployment rate rose to 5.1 percent from 4.8 percent in February and 4.4 percent in March 2007. Employers reduced their payrolls by 80,000 jobs in March, the third straight month of decline. And the department revised the previous two months' employment levels down by 67,000 positions.

"We're in recession," said David Wyss, chief economist of Standard & Poor's. "It's hard to conclude anything else."

While unemployment remains low by historical standards, job-seekers and firms that help place workers said employers are far more reluctant to hire as they have become wary of what the soft economy will mean for their businesses.

"If you're working, you might not think there is a recession," said Ruby Gilmore, an Alexandria resident who was laid off from her job in human resources in January and is still looking for work. "But looking for a job, things are very competitive. . . . It is like they are looking for a reason not to hire you."

Unemployment is worst among people with little education. The seasonally adjusted rate for people with less than a high school diploma rose to 8.2 percent in March from 7.3 percent the month before. Unemployment was unchanged, at 2.1 percent, for those with a bachelor's degree or higher.

The report shows how the problems in the housing and financial markets are rippling through other sectors, reflecting the deep connections between seemingly separate parts of the economy.

The number of construction jobs, which has declined steadily for 18 months, continued to fall. That sector shed 51,000 positions, as fewer homes are being built.

Fewer houses mean less construction and building materials; the number of manufacturing jobs fell 48,000, with some of the steepest losses among makers of lumber, drywall, and other materials. Automakers also cut jobs.

With their homes less valuable, U.S. consumers seem to be spending less, which means stores need fewer workers. The number of retail jobs fell 12,400, with the steepest losses in sellers of building materials and appliances, which are strongly tied to the housing business.

Financial firms cut 5,000 jobs, with the biggest losses in "credit intermediation" companies, which includes banks and mortgage brokers.

This has caused businesses that have little to do with housing to become less confident about the future. Professional and business services, a sector that had been keeping the economy afloat, trimmed 35,000 jobs.

"That's what's perhaps most disturbing of all," said Dana Johnson, chief economist of Comerica Bank. "Professional and business services had been a considerable source of strength."

The steepest service-sector losses were in employment services. When employers want to cut back, they are often more inclined to trim temporary rather than permanent employees, so the sector tends to be a leading indicator of what is to come.

"The first thing people do is cut back on temporary staff," said Paul Villella, chief executive of HireStrategy, a Reston employment services firm. "Then, if things get really bad, they cut into their core staff and do layoffs."

Information firms, which include publishers, broadcasters and telecommunications companies, cut 6,000 jobs, reflecting the broadness of this retrenchment.

"There is more sluggishness around hiring," Villella said. Clients that were looking to hire 10 people have cut back to six, he said, and are taking longer to bring those six onto staff. "They're more careful, use more caution, and are more specific and narrow in what they want."

So far in this downturn, there have been relatively few layoffs. Instead, employers have held off on hiring and let empty positions stay that way. But that may be changing. Last week, the number of new claims for unemployment insurance rose to the highest since Hurricane Katrina.

There were some bright spots in the Labor Department report. Wages are climbing at a reasonable pace, with average hourly earnings up 0.3 percent, or 5 cents, in March from the previous month. Coupled with workers clocking slightly more hours, nonmanagerial workers saw their pay rise 0.5 percent.

A few sectors continue to add jobs, notably education and health services, with 42,000 new net positions, and leisure and hospitality, which added 18,000.

Job-seekers describe a frustrating ordeal in their search for new work. Drew Watson, 52, an Annandale resident who was laid off from his job as a software engineer, said he has had such a hard time finding work that he will consider working at a gas station so he can keep paying the rent.

"I told my wife that I'll always keep a roof over her head," he said yesterday while updating his résumé at the Alexandria employment center. "Now, I'm worried about keeping that promise."" (Neil Irwin and Michael A. Fletcher, The Washington Post, April 5, 2008)