Jobless Rate in Nation Falls to 5.5%
The U.S. economy added jobs in February--the first such gain in seven months--pushing unemployment down to 5.5% and capping two weeks of signs that the recession is finally giving way to recovery.
Employers hired a net 66,000 workers last month after laying off 126,000 in January and 106,000 in December, the Labor Department said Friday. Although officials cautioned that the hiring may have been the result of temporary factors such as the unusually warm winter, most analysts treated the new figure as the missing piece needed to confirm that the recovery is underway.
Also Friday, Congress approved a long-delayed measure to extend federal aid to the unemployed, as well as provide billions of dollars in business tax breaks in an effort to rev the economy. President Bush is expected to sign the bill into law today.
“This is as good as it gets,” said Robert J. Barbera, chief economist with Hoenig & Co., a Rye Brook, N.Y., brokerage firm. “The numbers speak to the fact the recession is ending without saying anything about a boom.”
Investors and some analysts have begun to worry that instead of inching out of recession, the economy could bolt out, forcing the Federal Reserve to reverse course and start raising interest rates to dampen growth.
The Fed’s policymaking Open Market Committee is scheduled to meet March 19 and expected to leave its signal-sending short-term interest rate at a four-decade low of 1.75%. But the committee may declare that its policy is no longer tilted in favor of further rate cuts.
February’s jobless rate was down from January’s 5.6%, the second straight monthly drop and the lowest rate since October. If the decline spells a trend, unemployment would have topped out at 5.8% in December, by far the lowest jobless peak of any recession since World War II.
The unemployment rate for Latinos fell in February from 8.1% to 7.1%, the Labor Department said. The rate for blacks slid to 9.6% from 9.8%, the department said.
In recent weeks, the government and industry groups have issued a string of surprisingly rosy economic reports.
Washington boosted its estimate of growth in the final quarter of last year from a barely perceptible 0.2% to 1.4%. Trade groups said existing homes were selling at a record annual rate in January of 6.07 million units, and new autos were sailing out of showrooms at a respectable annual rate of 16.7 million vehicles last month--even with an end to no-interest financing deals.
The rash of good news prompted Fed Chairman Alan Greenspan to take the unusual step Thursday of altering previously delivered House testimony that a recovery might begin soon in order to tell the Senate that one “is already well underway.”
The combination of events pushed stocks higher Friday. The technology-laden Nasdaq composite index climbed 48.04 points, or 2.6%, to 1,929.67. The Standard & Poor’s 500 index rose 6.77, or 0.6%, to 1,164.31. The Dow Jones industrial average gained 47.12, or 0.4%, to 10,572.49.
The Dow gained nearly 2% for the week, posting its longest winning streak since May and extending its year-to-date advance to 5.5%. The S&P; added 2.9% for the week, erasing its losses for the year, and Nasdaq rose 7%, paring its loss for the year so far to 1.1%.
Labor Department officials said most of the February employment gains, which occurred for the first time since August, “can be attributed to special factors,” especially warm weather that boosted construction employment by 25,000 and retail payrolls by 58,000.
But analysts said the employment numbers were still good news.
“Even if they were flat, that would be good,” said Banc of America Securities economist Peter E. Kretzmer. “It shows labor market deterioration is on the wane.”
Especially encouraging, analysts said, was the fact the nation’s long-suffering manufacturing sector lost only 50,000 jobs in February. That was an improvement over the 110,000 monthly loss that goods makers averaged during the last year.
Also encouraging was the addition of 14,000 workers in the industry that provides temporary workers to other businesses. It has borne much of the brunt of recent job losses. Industry employment is down 655,000, or 18.5%, from its September 2000 peak.
Average hourly earnings for production and nonsupervisory workers, who make up about 80% of the nation’s work force, rose only 2 cents to $14.63. In the last year, hourly earnings are up 3.7%, the Labor Department said.
The Senate voted 85 to 9 on Friday for a bill extending jobless benefits and providing business tax breaks designed to spur growth. The vote came a day after the House approved the measure by a 417-3 vote, capping a months-long partisan debate over how--and whether--Washington should help an economy that appears to be mending on its own.
“This will help folks who have been hurt, and it will provide a direct economic stimulus,” said Sen. Max Baucus (D-Mont.). He was one of 37 Democrats who voted for the bill, including Sens. Dianne Feinstein and Barbara Boxer of California.
Only one Republican, Sen. Lincoln Chafee of Rhode Island, voted against the measure.
Under the bill, people who applied for unemployment benefits after March 15 of last year would be eligible for extended aid if they exhausted what is now up to six months of eligibility.
The bill would grant workers nationwide as many as 13 additional weeks of federal unemployment checks.
In certain states with high levels of unemployment--congressional aides say California is one--workers could receive a second extension of up to 13 weeks. As a result, some workers would be eligible for up to a year of relief.
This week’s action came as Congress was under increasing pressure to help people left unemployed after the Sept. 11 terrorist attacks. For many of them, unemployment benefits will begin to expire Monday.
The extensions of benefits, which would expire at the end of this year, would cost more than $12 billion.
Extending jobless aid is a routine step in Washington to ease the pain of a recession. But the business tax breaks in the bill were more controversial.
The most significant pro-business provision, costing $32 billion in 2003, would encourage companies to make capital investments by granting them 30% tax write-offs for the next three years on the purchase of certain equipment. The tax break on depreciation is seen as a boon to the high-tech industry but goes further than many Democrats wanted.
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