U.S. Payrolls Fell 108,000 in March; Jobless Rate Held at 5.8%
By Carlos Torres
Washington, April 4 (Bloomberg) -- The U.S. economy lost 108,000 jobs in March, almost three times the number expected, and the unemployment rate held at 5.8 percent as the economy stumbled with the advent of war against Iraq.
The decline in payrolls followed a loss of 357,000 jobs in February, more than originally reported, the Labor Department said. The jobless rate compares with an eight-year high of 6 percent reached in December.
Concerns about the war and bleak job prospects have shaken consumer confidence and cooled household spending since the start of the year. Companies have responded by cutting orders, production and payrolls, which may keep economic growth subdued. The loss of 465,000 jobs in two months may prompt the Federal Reserve to consider lowering its benchmark interest rate from 1.25 percent, a four-decade low, some economists said.
The drop in payrolls ``supports the idea that the Fed will have to come in and cut rates at the next meeting, even if the war is going well,'' said James Glassman, a senior economist at J.P. Morgan Securities Inc. in New York, before the report. ``It's not so much that the economy is falling apart -- it's just not accelerating, so we may need an extra push.''
The Fed's next meeting is scheduled for May 6, and some economists predict the central bank may cut rates before then.
Economists had expected payrolls to fall by 35,000 last month following a previously reported drop of 308,000 in February, based on the median of 67 forecasts in a Bloomberg News survey. The unemployment rate was expected to rise to 5.9 percent. The percentage of the U.S. population holding jobs fell to 62.3 percent in March, the lowest since March 1994.
Manufacturing Jobs
Employment in service-producing industries, which include retailers, banks and government agencies, declined 94,000 last month after dropping by 256,000 in February. The drop was led by a fall in retail and government employment.
Manufacturers lost 36,000 jobs last month, the 32nd straight decline. The manufacturing workweek held at 40.8 hours and overtime fell to 4 hours from 4.1 hours.
``It remains to be seen how demand recovers after the war, because I don't think the slowdown we're in is all due to the war in Iraq,'' Daniel Carp, chief executive officer of Eastman Kodak Co., the world's largest photography company, said in an interview this week. The company announced in January that it would eliminate as many 2,200 jobs this year to cut costs as demand slumped.
Demand wasn't any better last month for other companies. Solectron Corp., the world's No. 2 maker of electronics for brand- name companies, said it will fire an additional 12,000 workers after forecasting its ninth straight quarterly loss.
Solectron's job cuts are in addition to the 40,000 firings already completed since 2001 and previously announced plans for another 1,000 by the end of August. The company, which assembles computers and networking gear for businesses such as Hewlett- Packard Co. and Cisco Systems Inc., has closed plants and moved production to lower-cost regions as clients have trimmed orders.
War's Impact
The payroll numbers may have been depressed by the activation of civilian workers for military duty in the war against Iraq. Defense Department figures show the U.S. ordered 38,340 reservists to mobilize from mid-February to mid-March, the period corresponding to the Labor Department survey.
The government instructs companies to exclude from their payroll counts workers called up to serve in the armed forces because they are no longer in the civilian labor force. The U.S. ordered 91,358 reservists to mobilize from mid-January to mid- February, during the previous Labor survey period.
The February payroll and hours worked figures were also damped by severe winter weather in much of the country, economists said last month. The rebound in hours in March may reflect a return to more seasonable weather, they said.
Average weekly hours worked rose to 34.3 hours from 34.1 in February. Economists had expected hours would rise to 34.2 hours, according to the Bloomberg News survey.
Hours and Pay
Incomes increased last month. Workers' average hourly earnings rose 0.1 percent, or 2 cents, in March, after a 0.6 percent increase the previous month. Economists had expected a 0.2 percent increase in hourly wages. Average weekly earnings rose to $517.93 last month from $514.23 in February.
Consumer confidence slumped to a nine-year low last month, damped by the weak job market and slowing income growth. The percentage of people who said jobs were hard to find rose to 32.3 percent last month, the highest since May 1994, according to the New York-based Conference Board, a private research group.
Federal Reserve policy makers singled out weak employment as a particular concern last month when they refrained from characterizing the current risks to the economy because of the ``uncertainties'' created by the war with Iraq.
``There is the risk that the deterioration in jobs will affect consumer behavior,'' said Jade Zelnik, chief economist at RBS Greenwich Capital in Connecticut, before the report. ``The longer we see jobs decline, whatever the reason, the more likely it is that it will start to impact consumer activity.''
Persistent joblessness is also causing the private group of economists that monitors the ups and downs of the U.S. to delay calling an end to the recession that started in March 2001.
``Because employment is still at a low level, it remains our conclusion that additional time is needed to interpret the movements of the economy last year and this year,'' the Business Cycle Dating Committee of the National Bureau of Economic Research said last month. Some economists estimate the recession ended in the last quarter of 2001.
Recession
Since then, the job market has been even weaker than that following the 1990-1991 recession, which was dubbed the ``jobless recovery.'' Payrolls have dropped in the 15 months since the beginning of 2002 compared with an increase of 211,000 in the 14 months following the recession that ended in March 1991.
Among blacks, the unemployment rate fell to 10.2 percent from 10.5 percent in February. The jobless rate for Hispanics decreased to 7.5 percent from 7.7 percent, and for whites rose to 5.1 percent from 5 percent.
For teenagers, unemployment jumped to 17.7 percent in March from 17.1 percent. The jobless rate held steady for women at 5 percent and for men held at 5.3 percent.
quote.bloomberg.com |
