February 7, 2003Unemployment Rate Falls to 5.7% as Job Growth Surges Employment grew by 143,000 jobs last month, the biggest monthly gain since 2000, and the jobless rate fell to 5.7 percent, from 6 percent in December, the Labor Department said today. Still, many analysts cautioned that the improvement stemmed partly from statistical blips, and stocks were down this afternoon. "Although the headline number is better than expected, I don't think this changes the basic employment picture," said Richard D. Rippe, the chief economist at Prudential Securities. "We've had rough job stability over the last eight or nine months." The loss of jobs since the recession began in March 2001 remains the worst in almost 20 years. "The economy is not strong enough," President Bush said today at the swearing-in ceremony for Treasury Secretary John W. Snow. "We will not be satisfied until this economy grows fast enough to employ every man and woman who seeks a job." Mr. Bush called on Congress to pass a 10-year, $670 billion plan consisting mostly of tax cuts. Democrats oppose the plan, and some Republicans have criticized the size of the package, making revisions to it likely. Even if it did not offer a clear signal that the job market has reached a turning point, the employment report suggested that the economy may at least have bottomed in recent weeks and moved beyond the weakness of late last year. "The worst fears from November and December were washed away," said Steven Wieting, a senior economist at Salomon Smith Barney. "A better outlook awaits some relief over these concerns about war." The report clearly offered some reasons for optimism. Construction companies added 21,000 jobs, their largest gain since August, as the housing boom continued. Hotels added workers for the fourth consecutive month, their longest growth streak since 2000. Manufacturing, which has been hit harder than any other industry during the downturn, cut another 16,000 jobs, its smallest reduction since last summer. Joblessness declined most last month among groups that typically suffer the worst effects of recessions. The unemployment rate for African-Americans fell to 10.3 percent, from 11.2 percent in December, while the rate for whites remained 5.1 percent. It was 8.5 percent for workers without a high-school diploma, down from 9 percent, and 3 percent for those with bachelor degrees, up slightly from 2.9 percent. Still, many analysts noted that much of last month's jobs surge stemmed from seasonal factors that the government uses to adjust its statistics. A lack of hiring by retailers made December's numbers look worse than they were, and the absence of the normal retail layoffs in recent weeks made January appear better. Economists also said that revisions associated with the 2000 Census made them wary of making too much of the drop in the jobless rate, which was the largest since 1998. At 5.7 percent, the rate is below its average for 2001 and at its lowest point since August. "We remain skeptical," said Ian Shepherdson, chief domestic economist at High Frequency Economics, a forecasting firm. "For now, though, it looks good. Economists said the January employment report would probably not change the policy of the Federal Reserve, which has cut its benchmark interest rate 12 times since the start of 2001 to lower borrowing costs and stimulate the still-weak economy. Most forecasters expect the Fed to keep the federal funds rate on overnight loans among banks at 1.25 percent through the spring. The jobs data "was well inside the range that the Fed would have expected," Chris Varvares, president of Macroeconomic Advisers, a research company in St. Louis. While January's increase in payrolls outside the farming sector was greater than most forecasters had expected, the government also revised the figures from December to show a larger loss of 156,000 jobs than it had originally reported. Stock prices moved lower this afternoon, with the Standard & Poor 500-stock index declining more than 1 percent. Meanwhile, bonds recouped their early losses and were trading higher. Despite the overall jobs gains, the report also suggested that executives in many industries remained reluctant to hire. Employment at staffing agencies, which is often a leading indictor of the economy's direction, fell slightly and is almost 20 percent lower than its peak in 2000. The number of people who said they were working part time because they could not find full-time work rose in January. |