Layoffs Push March Jobless Rate to 4.3%
Corporate layoff announcements finally took a toll on the U.S. economy last month, nudging the nation’s unemployment rate up to 4.3% and slashing 86,000 jobs from U.S. payrolls, the largest job loss in almost a decade, the Labor Department said Friday.
The drumbeat of layoff announcements in recent months has failed until now to show up in the nation’s job numbers. But cutbacks, like this week’s by Dupont Co., Inktomi Corp. and Sycamore Networks Inc., leave little doubt that the country has not dodged a painful contraction in employment. They spell new trouble for an economy that already depends on consumers’ continuing to buy, something they are not likely to do without jobs.
“It’s the first sign the layoff announcements are exacting a price,” said Jason Trennert, an economist with ISI Group, a New York broker-dealer that specializes in economic research. “It means consumer spending will fade in the coming months.”
Analysts said the new jobs report meant the Federal Reserve would continue cutting interest rates to revive growth, but they disagreed about whether it added urgency to the central bank’s effort.
Bruce Steinberg, chief economist at Merrill Lynch & Co., said the Fed could trim another half-point from key short-term rates as early as next week. “Today’s data will pressure the Fed to act sooner rather than later,” he said in a note to clients immediately after the report’s release.
Other analysts predicted that Fed policymakers would not act until their mid-May meeting. The central bank has already slashed rates 1.5 percentage points in three half-point moves this year.
Stock prices fell substantially in the wake of Friday’s report. But it was hard to tell how much was due to the job losses and how much was traceable to the latest round of corporate profit disappointments and an announcement that Pacific Gas & Electric Co., California’s largest utility, had sought bankruptcy protection. The Dow Jones industrial average lost 127 points and the technology-heavy Nasdaq composite index gave back 65 points.
March’s uptick in unemployment from 4.2% to a 20-month high of 4.3% had been widely expected, and left the rate spectacularly low by historical standards.
What had not been expected was the loss of 86,000 jobs during the month, the biggest since November 1991. Even in February, with economic conditions seemingly little different from last month, U.S. employers added 140,000 workers, according to the Labor Department.
Many of the losses were among manufacturers, who have been shedding employees at a ferocious pace. Factory payrolls shrank by 81,000 in March, bringing the total since last June to 451,000.
More telling, analysts said, were losses among service businesses, many of which have been towers of employment strength until recently. Retailers, for example, cut 46,000 jobs last month after adding an average of 37,000 in each of the previous three. Bars and restaurants cut 25,000.
“The cancer in manufacturing is beginning to metastasize to other parts of the economic body,” said Paul L. Kasriel, head of economic research at Northern Trust Co. in Chicago.
Average hourly wages of production and nonsupervisory workers, who make up about 85% of the nation’s work force, rose 6 cents, or 0.4%, in March to $14.17.
Even before Friday’s report, analysts had suggested the nation’s jobs picture might be considerably bleaker than the government statistics had portrayed it. They pointed out that the unemployment rate was held down this year as much by slow growth of the labor force as by an increase in people working.
In addition, analysts said, employment growth figures earlier this year were strongly influenced by a fudge factor the government uses to take into account job additions at hard-to-count new businesses. “They assume that new businesses are still adding” workers, said Richard B. Berner, chief U.S. economist for Morgan Stanley. “My guess: New businesses are falling off a cliff.”
Finally, policymakers such as Fed Vice Chairman Roger Ferguson said American businesses might have been “hoarding” more workers until recently than they actually needed because employees were so hard to hire in a tight labor market. They warned that the trend could come to an abrupt end if firms concluded the economy was headed into a recession.
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Unemployment
Percentage of U.S. work force not employed, seasonally adjusted:
March: 4.3%
Source: Labor Department
