At the same time, the national unemployment rate rose from 4.8 percent to 5.1 percent, the clearest signal yet that the economy might already be shrinking. The new snapshot of the job market, released by the Labor Department Friday, underscored the damage that a trio of crises --in the housing, credit and financial sectors -- has inflicted on companies, jobseekers and the economy as a whole.

"The labor market has indeed turned south," said Joel Naroff, president of Naroff Economic Advisors. "That was the one last bastion of hope to stay out of a recession. Now the question is how deep and how long will it last?"

The unemployment rate was the highest since September 2005, when significant job losses followed the devastating blows of Gulf Coast hurricanes.

Job losses were widespread in March. Construction, manufacturing, retailing, financial services and various business services all racked up losses. That overwhelmed gains elsewhere, including in education and health care, leisure and hospitality as well as in government.

The new employment figures were much weaker than economists were expecting. They were anticipating a drop of 50,000 payroll jobs and the unemployment rate to rise to 5 percent.

The 5.1 percent rate is relatively modest by historical standards, but was nonetheless the highest in 2 1/2 years.

Job cuts in both January and February turned out to be even deeper. Employers got rid of 76,000 in each month. The elimination of 80,000 jobs in March was the most since March 2003, when the labor market was still struggling to recover from the 2001 recession.

The economy is suffering the effects of a housing collapse, a credit crunch and a financial system in turmoil. That's causing people and businesses to hunker down, crimping spending, capital investment and hiring. Those things in turn further weaken the economy in what has become a vicious cycle.

For the first time, Federal Reserve Chairman Ben Bernanke acknowledged Wednesday that the country could be heading toward a recession, saying federal policymakers are "fighting against the wind" in combating it. Many other economists and the public believe the recession already has arrived.

Bernanke wouldn't tip his hand about the Fed's next move. However, many economists believe the central bank will lower interest rates again when they meet later this month.

The Fed has taken a number of extraordinary actions recently -- slashing interest rates, providing financial backing to JP Morgan's takeover of troubled Bear Stearns and opening an emergency lending program for big investment houses. All the actions are ultimately aimed at limiting damage to the national economy.

With a public on edge, Congress, the White House and presidential contenders are scrambling to come up with their own relief plans even as they engage in a political blame game.

With the pace of hiring slowing down, the number of unemployed people increased to 7.8 million in March; workers with jobs saw only modest wage gains at the same time.

Average hourly earnings for jobholders rose to $17.86 in March, a 0.3 percent increase from the previous month. That matched economists' forecasts. Over the past 12 months, wages grew 3.6 percent. With lofty energy and food prices, workers may feel like their paychecks are shrinking.

Many analysts believe the economy shrank in the first three months of this year and could still be ebbing now. The government will release its estimate of first-quarter economic growth later this month. Under one rough rule, if the economy contracts for six straight months it is considered in a recession.

Bernanke, however, has said he is hopeful the economy will improve in the second half of this year, helped by the government's $168 billion stimulus package of tax rebates for people and tax breaks for businesses, as well as the Fed's rate reductions.

Still, even Bernanke predicted this week that the unemployment rate would rise in the months ahead. Some analysts say it could climb to 5.5 percent or higher by year's end.

For the second straight month, nervous employers got rid of jobs nationwide. In February, they sliced payrolls by 63,000, even deeper than the 22,000 cut in January, the Labor Department reported Friday.

The grim snapshot of the country's employment climate underscored the heavy toll the housing and credit debacles are taking on companies, jobseekers and the economy as a whole.

"It sounds like the recession bell is ringing for the U.S. economy, although it is still faint," said Stuart Hoffman, chief economist at PNC Financial Services Group.

On Wall Street, stocks tumbled. The Dow Jones lost 146.70 points, a little more than 1 percent to close at 11,893.69. The Dow was down 370 for the last two days of the week.

The worsening situation will prompt the Federal Reserve to cut a key interest rate deeply -- perhaps by as much as three-quarters of a percentage point -- at its next meeting March 18, or possibly sooner, to help brace the teetering economy, analysts predicted.

The shower of pink slips was widespread. Factories, construction companies, mortgage brokers, real-estate firms, retailers, temporary-help firms, child day-care providers, hotels, educational services, accounting firms and computer designers were among those shedding jobs. All those cuts swamped job gains at hospitals and other health care sites, bars and restaurants, legal services and the government.

"Losing a job is painful, and I know Americans are concerned about our economy; so am I," said President Bush. "It's clear our economy has slowed."

The big question: Just how much? The weak employment report pushed an increasing number of private economists into believing the economy is probably shrinking now. Under one rough rule, the economy would have to contract for six months for the country to be considered in a recession.

The unemployment rate actually dipped slightly from 4.9 percent to 4.8 percent, as 450,000 people left the labor force for any number of reasons. Economists thought many people probably gave up looking for work.

"It stands to reason that a large share of the people left because they didn't feel like anything was there for them -- that the market was too weak to be searching for a job at this point," said Mark Zandi, chief economist at Moody's Economy.com.

To relieve persistent credit problems, the Federal Reserve announced Friday that it will increase the amount of loans it plans to make available to banks this month to $100 billion. The Fed already has provided a total of $160 billion in short-term loans to cash-strapped banks since December. The Fed, in another step, said it will make $100 billion available to a broad range of financial players through a series of separate transactions.

Crumbling employment conditions are feeding fears the economy will fall victim to all the stresses. Until recently, the positive forces of job and wage growth have helped to offset the negative forces hitting people from the housing and credit crises. Now people and businesses alike are more cautious, spelling more trouble for the economy.

"The debate should no longer be about whether there is or is not a recession, only about how deep it will be," said Nigel Gault, chief economist at Global Insight.

The elimination of 63,000 jobs in February was the most since March 2003 and marked the second month in a row of job losses. The last time the economy suffered two consecutive months of job losses was in May and June 2003, when the labor market was still struggling to recover from the blows of the 2001 recession.

"Businesses got cold feet, and when that happens the easiest thing to do is to put hiring on hold and wait until the dust clears," said Ken Mayland, economist at ClearView Economics.

Economic growth slowed to a near standstill of just a 0.6 percent pace in the final quarter of last year. Before Friday's employment report, many thought growth would weaken further -- around a 0.4 percent pace. Now, however, a growing number think the economy is contracting.

Bush's top economic adviser, Edward Lazear, acknowledged Friday that the economy may dip into negative territory in the current quarter. Lazear's comment was the most pessimistic assessment heard out of the White House. He would not discuss whether the White House believes the economy will actually fall into a recession.

The Bush administration was hoping the government's speedily enacted economic stimulus package -- including tax rebates for people and tax breaks for businesses -- will help bolster the economy in the second half of this year.

"I know this is a difficult time for our economy, but we recognized the problem early and provided the economy with a booster shot," Bush said. "We will begin to see the impact over the coming months," the president predicted.

Democrats, however, said more relief is needed now.

House Speaker Nancy Pelosi, D-Calif., spoke of charting a "new direction for our economy." Rep. Barney Frank of Massachusetts, chairman of the House Financial Services Committee, called for action to stem record-high home foreclosures.

The Democratic presidential contenders, Sens. Hillary Rodham Clinton of New York and Barack Obama of Illinois, blamed the job losses on what they believe are failed Bush policies. "The news should put to rest any doubts that our economy is in deep trouble," Clinton said. Obama said the employment news meant "more heartache and struggle" for Americans.

On the employment front, workers with jobs saw modest wage gains.

Average hourly earnings for jobholders rose to $17.80 in February, a 0.3 percent increase from the previous month. Over the last 12 months, wages were up 3.7 percent. With lofty energy and food prices, though, workers may feel like their paychecks are shrinking.

Spreading fallout from the housing and credit troubles are the main factors behind the economic slowdown. People and businesses alike are feeling the strains and have turned cautious. Adding to the stresses on pocketbooks, budgets and the economy: skyrocketing energy prices. Oil prices, which have set a string of record highs in recent days, now top $105 a barrel. Gasoline prices have marched higher, too.

All those problems are putting consumers in a gloomy state of mind.

Consumer confidence sank to a new low of 33.1 in early March, according to the RBC Cash Index. That was the worst since the index began in 2002.

To help shore up the economy, Federal Reserve Chairman Ben Bernanke signaled last week that the central bank is prepared to lower interest rates again. Economists are now predicting a deep rate reduction by the Fed on or before its regularly scheduled meeting March 18. The Fed, which has been slicing the rate since September, recently turned more forceful. It slashed the rate by 1.25 percentage points during just eight days in January -- the biggest one-month reduction in a quarter-century.

The Mortgage Bankers Association, in a quarterly snapshot of the mortgage market released Thursday, said the proportion of all mortgages nationwide that fell into foreclosure shot up to a record high of 0.83 percent in the October-to-December quarter. That surpassed the previous high of 0.78 percent set in the prior quarter.

"Clearly it's the worst it's been," chief association economist Doug Duncan said in an interview with The Associated Press.

More homeowners -- at the same time -- fell behind on their monthly payments.

The delinquency rate for all mortgages climbed to 5.82 percent in the fourth quarter. That was up from the 5.59 percent in the third quarter and was the highest since 1985. Payments are considered delinquent if they are 30 or more days past due.

Homeowners with tarnished credit who have subprime adjustable-rate loans were the hardest hit. Foreclosures and late payments for these borrowers also swelled to all-time highs in the fourth quarter.

The percentage of subprime adjustable-rate mortgages that entered the foreclosure process soared to a record of 5.29 percent in the fourth quarter. That was up from 4.72 percent in the prior quarter, which had marked the previous high. Late payments skyrocketed to a record high of 20.02 percent in the fourth quarter, up from 18.81 percent -- the previous high -- in the third quarter.

The association's survey covers almost 46 million home loans nationwide.

The worsening foreclosure and late payment figures come as fears grow that the country is teetering on the edge of a recession or in one already.

The wave of foreclosures threatens to deepen the already severely depressed housing market. The homes people are forced out of add to the big glut of unsold homes already on the market. That forces even more cutbacks by homebuilders, taking a big bite out of national economic activity. Harder-to-get credit, meanwhile, has thwarted would-be home buyers, aggravating problems in the housing market.

Homeowners with spotty credit histories or low incomes who took out higher-risk subprime adjustable-rate mortgages have suffered the most distress as the housing market went from boom to bust. Initially low interest rates that reset to much higher rates have clobbered these borrowers. With home values dragged down by the slump, many borrowers were left with mortgages that eclipsed the value of their homes.

Even with relief efforts under way by industry and the government, Federal Reserve Chairman Ben Bernanke, earlier this week, warned that foreclosures and late payments on home mortgages are likely to rise "for a while longer."

The MBA's Duncan agreed. "We expect some increases in the next couple of quarters," he said.

Against this backdrop, Bernanke called for additional relief and urged lenders to help distressed owners by lowering the amount of their loans. "This situation calls for a vigorous response," Bernanke said in a speech Tuesday.

Bernanke's recommendation for lenders to reduce the amount owed on troubled home loans goes beyond the position staked out by the Bush administration. The Fed chief, however, didn't go as far as to endorse some proposals embraced by Democrats on Capitol Hill.

Among the initiatives promoted by the adminstration is allowing some homeowners with certain subprime home loans to freeze their interest rate for five years.