Unemployment rate rises to 5.7 percent in March

By Leigh Strope

Associated Press

WASHINGTON – The nation’s unemployment rate nudged up to 5.7 percent in March, but employers added 58,000 new positions to payrolls, signaling a strengthening economy that hasn’t completely filtered down to the jobs market.

The March rate announced Friday by the Labor Department, was an increase of 0.2 percentage points from the previous month. Economists had been expecting a rise to at least 5.6 percent.

The rate has been bouncing up and down slightly for the past six months.

Employment gains in services and local government tempered job losses in construction and manufacturing. The 58,000 new jobs added last month marked the first gain in seven months and followed a revised February loss of 2,000 payroll jobs.

Businesses slashed thousands of jobs to cope with the recession, and company profits were hit hard. So economists say companies will be reluctant to quickly hire back laid-off workers until profits recover and executives are convinced the recovery is here to stay.

As it did during the last recession that ended in 1991, the nation’s unemployment rate still could rise in coming months as businesses regain financial strength. Some economists predict the rate will climb to more than 6 percent before a prolonged drop-off occurs.

“Despite strong economic growth, the labor market will show only very gradual improvement in 2002,” predicted Merrill Lynch’s chief economist Bruce Steinberg. “That’s because corporate restructuring activities will continue full force as companies resize themselves for profitability.”

On Wall Street, stocks moved higher after the report was issued but by early afternoon major indexes were lower. The Dow Jones industrial average was off 14 points and the Nasdaq index dropped 19 points.

To revive the economy, the Federal Reserve slashed interest rates 11 times last year, pushing down some short-term rates to the lowest levels seen in four decades, making borrowing attractive for many businesses and consumers.

Some economists said Friday’s report makes it less likely that the Fed may begin to raise short-term interest rates as early as May. Others still say a rate increase could come in June. But others aren’t so sure. They wonder whether consumers who snapped up big-ticket goods throughout the slump will continue to spend briskly, a factor affecting the strength of the recovery.

Consumer confidence soared in March to its highest level since Sept. 11.

Job cuts continued at the nation’s factories with a loss of 38,000, but it was at the slowest pace since late 2000. Losses have averaged 111,000 a month from January 2001 to January 2002.

In manufacturing, employment in electronic equipment dropped by 10,000 and industrial machinery fell by 7,000 – much smaller than average losses during the past year.

Several manufacturing industries had small gains in March after months of losses, including stone, clay and glass with 2,000; primary metals with 2,000; and rubber and miscellaneous plastics with 4,000. Transportation equipment lost 12,000 jobs in March, primarily in aircraft and parts. Since Sept. 11, aircraft manufacturers have lost 42,000 jobs.

Construction employment fell by 37,000 in March, following an increase the month before. Virtually all the jobs lost were in heavy construction.

But employment in services increased by 118,000 last month – the largest gain in a year and a half. Employment in that sector has nearly recovered from the combined loss of 245,000 jobs in October and November.

In services, temporary employment firms added 69,000 jobs – the second consecutive month of growth in an industry that has lost nearly a fifth of its jobs since September 2000. Health services employment continued to increase last month, rising by 32,000.

Local government education added 27,000 jobs in March, about twice the monthly average in the last year. But air transportation services jobs were cut in March, reversing gains over the last two months. This followed losses of 111,000 in the last three months of the year.