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Friday’s report on the job market in August — showing the first monthly drop in four years — raised concerns that the recession afflicting the housing sector  may be spilling over into the wider economy. The much weaker-than expected employment report puts added pressure on the Federal Reserve to cut interest rates at its next scheduled meeting Sept. 18.

But it’s still too soon to assess just how much long-term damage will be caused by the downturn in housing prices and the mortgage mess that has rocked the financial markets.

Friday’s employment report was a stunner: Economists and market watchers had expected the report to show some 110,000 new jobs created in August. But the government tallied a net loss of 4,000 jobs, the first monthly drop since August 2003. The government also revised job gains reported earlier for June and July, cutting the numbers for those two months by 81,000 jobs.

With the latest report, payroll growth has been averaging just 44,000 jobs a month over the past three months, well below the second-quarter average of 162,000.

As the economic numbers for August begin to roll in, the impact of the financial storm that hit global credit markets last month is slowly becoming clearer. An already-slowing economy seems to have weakened further.

Most economists say it's too soon to forecast a recession, but the consensus view is that the odds of one are rising.

“A recession is still avoidable in my opinion, but the Fed will need to act promptly and with authority to right this sinking ship,” said Scott Anderson, a senior economist at Wells Fargo Bank.

Even before Friday's report, economists had been trimming their growth forecasts. The latest survey of 50 economists by the Blue Chip Economic Indicators newsletter, conducted Aug. 1 and 2, found the consensus GDP growth forecast dropped a tenth of a percentage point to 2.0 percent for this year and 2.8 percent next year.

Before the meltdown in the credit markets last month, the Blue Chip consensus pegged the odds of recession in the next year at about one in four. That number recently jumped to one in three, according to Randell Moore, the newsletter’s editor.

Friday’s jobs report slammed stocks and raised the volume of calls for the Federal Reserve to cut rates again soon help stimulate growth.

The Fed cut its mostly symbolic discount rate in August but is expected to cut the more important federal funds rate by at least a quarter-point this month and another quarter-point in the fall, which would make many loans cheaper for consumers and businesses. Some Fed watchers say a third quarter point cut may be needed by year-end.

The Fed funds rate affects a wide range of consumer and business lending rates including rates on credit cards, home equity credit lines and some mortgages.

The growing signs of economic strain have consumers feeling more pessimistic — especially since most no longer have rising equity in their home to help fund their shopping trips. Consumer confidence dropped sharply in August, based on a widely watched University of Michigan survey.

Still, while consumers say they are more worried, they seem to have kept spending in August. Car sales showed surprising strength, and sales also held up relatively well at big chain stores like Wal-Mart. As long as job and wage growth continue to provide the cash to keep consumers spending, say many economists, the drop in housing prices won’t necessarily bring a wider pullback.

Some economists caution that Friday’s jobs report was at odds with the Federal Reserve’s periodic economic review released earlier this week. The so-called “beige book” survey of business conditions by the Fed’s 12 regional banks found that while the ongoing tightening of credit continues to weigh on the housing market, the impact on the rest of the economy so far appears to be limited.

And while the last big housing downturn in the late 1980s pushed the economy into recession in 1990, some economists make the case that the economy is less vulnerable now for several reasons. With inflation at or close to the Federal Reserve’s assumed target level of about 2 percent, the central bank has fairly broad latitude in cutting interest rates if GDP growth slows sharply. And as long as the global economy continues on a strong growth track, the U.S. economy is getting an unusual boost from outside its borders.

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