Hiring Surge Holds Jobless Rate Even
Employers added almost twice as many workers as expected in February, keeping the nation’s unemployment rate at 4.2% and suggesting that the economy is not in quite as deep a funk as it had seemed.
The Labor Department reported Friday that 135,000 new workers landed jobs during the month, down from the 224,000 who got work in January but substantially more than the 75,000 that forecasters had predicted.
Some of the job gains were in areas where the economy had shown its greatest weaknesses. Auto makers, whose payrolls had been sliced in response to slumping sales, called back 13,000 workers. The construction industry, where employment tumbled in December, extended an expansion streak begun in January by adding 16,000 jobs. Business services--a category that ranges from janitors to computer operators--reversed a four-month decline with the hiring of 24,000 people.
The gains were accompanied by another bit of good news for the average worker: a pickup in the pace of wage growth. Average hourly earnings of production and nonsupervisory workers, who make up 85% of the nation’s work force, rose 7 cents, to $14.10, according to the Labor Department. Earnings are now rising at a 4.1% annual rate, substantially higher than the 2% to 3% range of last year.
But wage and job gains were hardly uniform and were not uniformly greeted as harbingers of better times.
America’s troubled manufacturers slashed payrolls by 94,000 positions in February after cutting them by 96,000 in January. Job losses during the two months alone were greater than in all of 2000. Manufacturers also cut the average workweek by 0.3 hour to 40.6 hours, and weekly overtime by the same amount, to 3.8 hours. Since June, the average factory workweek has declined by one hour.
Nor is manufacturing, particularly high-technology, off to a good start this month. Chip maker Intel announced plans Thursday to reduce employment by 5,000, and computer networking equipment maker Cisco Systems followed Friday with plans to cut as many as 8,000 workers. Still unsettled is whether the high-tech sector will drag down the rest of the economy or the rest of the economy will compensate for high-tech.
“Clearly, the economy hasn’t fallen off a cliff,” said Diane C. Swonk, chief economist of Chicago-based Bank One Corp. “There’s economic malaise, but it’s hard to be bearish overall.”
Bearish, however, was how financial markets behaved Friday as the February employment report piled atop news that high-tech giant Intel Corp. expects sales to tumble a spectacular 25% this quarter, rather than the previously predicted 15%.
Investors fear that the latest job report will convince the Federal Reserve that the economy is coming back on its own and does not need a continuation of aggressive interest rate cuts.
The fear sent the technology-heavy Nasdaq composite index down 115.95 points, or 5.4%, to close at 2,052.78. The index has now fallen 59% from its high of exactly a year ago.
Other market indicators posted similar losses, though not quite as steep. The yield or market interest on the benchmark 10-year Treasury bill rose 5 basis points, to 4.94%.
Economists cautioned against reading too much into the markets’ dark reaction to the employment report. “Just because corporate profits and stock prices decline doesn’t mean the economy is falling apart,” said Mickey D. Levy, chief economist with Banc of America Securities in New York.
Analysts said that, although the new numbers hardly show the economy is out of the woods, they improve the odds that it can escape an outright contraction. “They argue that we’re in for a soft landing,” said Jonathan Basile, an economist at Credit Suisse First Boston Corp.
Basile said his firm raised its growth forecast for the January-March quarter from zero to 0.7% as a result of the new numbers. But he conceded that, even at this higher rate, growth would hardly feel as good as it once did. The economy had been expanding at a pace of better than 4% for four years before it suddenly began slowing last fall.
Analysts are counting on consumers to tide the economy over by continuing to buy, even as businesses cut investment budgets, high-technology plummets and corporations announce major layoffs.
Recent statistics that show Americans continuing to buy even as they report increasing worries about their economic prospects have encouraged analysts to think that such a mismatch of trends is possible.
Same-store sales at major retailers rose 3.9% last month, matching a similar rise in January, according to a Lehman Bros. report issued Thursday. Although auto sales fell 7.5% in February, the decline was from a spectacularly high level that prevailed a year ago. And even with the decline, sales ran at an annualized pace of 17.5-million vehicles, substantially above the 16-million-plus pace that auto industry executives have predicted for the year.
“The consumer has not dropped dead,” declared Swonk, the Bank One economist. “Whatever their worries, their actions speak louder than their words.”
But, in California and other places, high-tech industry setbacks are costing jobs and confidence.
For the moment, layoffs of the sort announced by Intel and Cisco apparently are being offset by hiring in other sectors. Such offsetting employment helped keep the national jobless rate of 4.2% at the same level as in January and either lowered the rates for groups most often hurt by slowdowns or left them unchanged, according to the Labor Department.
The jobless rate for blacks dropped from 8.4% in January to 7.5%. The rate for Latinos remained essentially unchanged at 6.3%.
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Unemployment
Percentage of U.S. work force not employed, seasonally adjusted:
February: 4.2%
Source: Labor Department
