The U.S. Labor Department reported today that payrolls fell for the second consecutive month in February, confounding economists’ predictions of an increase in jobs, Bloomberg reported.

Payrolls fell by 63,000, the most in five years, after a revised decline of 22,000 in January, the Labor Department said. The jobless rate declined to 4.8 percent, reflecting a shrinking labor force as some people gave up looking for work. Manufacturing payrolls dropped by 52,000, the biggest decline since July 2003, after falling 31,000 a month earlier. Economists had forecast a job loss of 25,000 in that sector.

“All the lights are flashing red,’ Nariman Behravesh, chief economist at Global Insight Inc. in Lexington, Mass., said in an interview with Bloomberg Television. “We’re in a recession. I don’t think there is any doubt about it at this point.’

Treasury notes soared after the report on concern that the weakening labor market, combined with lower home prices, higher fuel bills and a global credit squeeze will force consumers to further reduce spending.

Traders now anticipate Fed Chairman Ben Bernanke and his team will cut their benchmark interest rate by at least three-quarters of a percentage point at or before their March 18 meeting.

Economists had projected payrolls would rise by 23,000 following a previously reported 17,000 drop in January, according to the median of 76 forecasts in a Bloomberg News survey.