The economy is beginning to shed jobs at a worrisome pace. Initial unemployment claims soared 38,000 last week to 407,000, according to the Financial Times. That was well above the 366,000 that economists had predicted. Most of the stories note that it’s the highest level since Katrina in September 2005, but that was a statistical blip that doesn’t help us compare the proverbial apples to apples.

Here’s Bloomberg:

”This is just breaking into recession-type territory,” Stephen Gallagher, chief U.S. economist at Societe Generale SA in New York, said in an interview on Bloomberg Television. “400,000 is usually a trigger point when we consider recessionary times.”

A Bloomberg survey of economists predicts a key economic report out today will show that payrolls shrank by 50,000 jobs in March and that the unemployment rate will hit 5 percent.

The Wall Street Journal’s Ahead of the Tape column says job stats indicate the recession started sometime in January.

“The layoffs started in housing and spread from construction workers to broader manufacturing jobs, and now it’s in the financial sector,” says Thomas Higgins, chief economist at Payden & Rygel. Other sectors—from temporary help to retailing to transportation —are also softening.

The Journal says on C2: “Tough Forecasts Released.” Ahhh, space constraints. Most large companies see a weak economy lasting at least a year, according to a survey by Greenwich Associates. Who is Greenwich Associates? A Connecticut law firm? A cabal of hedge fundies? A Village co-op? We’re not told.

In layoff news, Motorola is slashing 2,600 jobs, while Dell says it will lay off more than the 10 percent of employees it previously said it was firing.

Anatomy of a bailout

The WSJ leads its right column on page one with testimony before Congress yesterday that the Federal Reserve tried to avoid bailing out Bear Stearns but instead guaranteed $30 billion of its loans and sought a low price for JPMorgan Chase’s deal for the investment bank.

“If you want to say we bailed out the market in general, I guess that’s true,” (Bernanke) said. “But we felt that was necessary in the interest of the American economy.” He reiterated comments from a day earlier that the Fed doesn’t expect to lose money on its $30 billion loan. J.P. Morgan has agreed to cover the first $1 billion in losses, if there are any.

That comment doesn’t jibe with what JPMorgan’s CEO Jamie Dimon in the next paragraph says about why his firm got involved:

Mr. Dimon said his bank “could not and would not have assumed the substantial risk” of buying Bear without the Fed’s involvement.

Bloomberg says “hours from a market meltdown,” Dimon played a high-stakes game of chicken with the Fed, saying no to a deal until the central bank guaranteed Bear’s risky loans. Officials said without shoring up Bear, they feared a market-shaking crash like the Panic of 1907 or the Great Depression.

”The sudden failure of Bear Stearns likely would have led to a chaotic unwinding of positions in those markets and would have severely shaken confidence,” Bernanke said.

Bear CEO Alan Schwartz, who told everyone that things were just fine while Bear circled the bowl, said his company’s balance sheet was as strong as anyone else’s but that rumors got a hold of it, causing the panicky run on the bank. (The NYT on C1 notes that Schwartz has hired Robert S. Bennett the uber-Washington lawyer people run to when they’re in trouble.)

As the WSJ’s Market Beat blog quotes Minyanville.com saying: “If chatter alone can cripple a franchise, how strong was the franchise to begin with? Taking it a step further, given the stated interdependency, could a shift in perception sink the entire system?”

Good questions.

Corporate welfare kings

The New York Times checks Senator Chris Dodd, a former Democratic presidential candidate, for doing the bidding of Bear, which has been one of his biggest contributors, even encouraging the dumb speculation that rumor-mongers did the company in by manipulating the market.

And the New York Fed chief calls the lie (or self-delusion) on Schwartz: “We only allow sound institutions to borrow against collateral,” he said. “I would have been very uncomfortable lending to Bear given what we knew at that time.”

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.