(May 4 – 12:00 ET) – Markets have proven resilient, but they were undeniably shocked by this morning’s U.S. jobs report.

Economists are making no attempt to hide their shock with numbers, which revealed 223,000 jobs lost in April. Consensus expectations were for a slight rise. The April numbers were the worst since the last recession.

“The U.S. jobs report was quite a stunner and possibly represents a watershed for the economy,” says BMO Nesbitt Burns Inc. “The only sector to register an increase was retail trade. Job losses are becoming more widespread, as over the last three months 58% of industries have cut workers. Compounding the bad news in this report, the unemployment rate rose a larger-than-anticipated 0.2 percentage points to 4.5%.”

The big question is whether or not this report betrays a recession. This morning the White House indicated that an earlier surprisingly strong GDP report would be revised significantly downward. This GDP report had given some hope that the U.S. economy is rebounding. “The bleak job report does raise some uncertainty over the strength and sustainability of future consumer spending — a pivotal element to a quick U.S. recovery,” says RBC DS.

CIBC World Markets says, “The two month run of job losses needn’t yet spell recession, at least in part because they came on the heels of decent employment gains in January and February.” Although successive months of losses have never come without a recession. “We expect U.S. growth of 1% or less in Q2 as consumer and business investment spending are hit by a further slowdown. It’s now no mystery why the FOMC was in a hurry to cut before its May meeting; close ties with major U.S. businesses likely gave the central bankers some idea of what was to come on the labour market front.”

Economists suggest that these numbers will help spark another 50 basis points cut at the next Fed meeting. CIBC sees the fed funds rate ultimately reaching 3.5% by the third quarter. BMO Nesbitt Burns says, “April’s payrolls report reinforces the view that the U.S. economy has not yet entered a recovery phase, and that the Federal Reserve still has work to do. We expect the Fed to cut rates by 50 bps on May 15, with a strong possibility of another 50 bps at the June FOMC.” DS sees 50 bps in May, followed by further future easing, too.

CIBC sees the aggressive cuts coming to Canada, too. “The Bank of Canada will now be less confident that an American rebound will carry the Canadian economic ball in the second half of the year. Expect Dodge to follow Greenspan with a half point rate cut on May 29.”