Payrolls Show 1st Gain Since July

For the first time in nearly a year, U.S. employers created more jobs last month than they cut, but it was not enough to keep the unemployment rate from rising slightly, the Labor Department reported Friday.

The number of payroll jobs increased by 58,000 in March. It was the first increase since the summer and another sign that the economy is beginning to bounce back slowly from the recession that began in March 2001.

The jobless rate moved in the other direction, rising to 5.7% in March from 5.5% in February. But it remained below the 5.8% peak reached in December after the Sept. 11 attacks aborted what appeared to be a tentative recovery.

“What you’re seeing is kind of classic. The labor market is lagging the business cycle, which is very normal as the economy emerges from recession,” said Jay Feldman, an economist with Credit Suisse First Boston.

Government statisticians attributed the divergence between the job creation and unemployment figures to different survey methodologies and other technical factors. The unemployment rate, for example, includes agricultural, household and self-employed workers who are left out of the payroll head count. If a self-employed person takes a newly created factory job, payroll employment goes up, but the unemployment rate is unaffected.

The important thing, analysts said, is that the March figures suggest the economy may have stopped hemorrhaging jobs after 12 months of contraction that reduced private-sector payrolls by 1.8 million.

Still, last month’s turnaround does not constitute a rollicking recovery. For that reason, analysts said, the Federal Reserve seems increasingly unlikely to raise interest rates until later this year.

The prospect of a slow-paced recovery caused bond prices to rise and yields to fall in Friday trading. Stock prices ended mixed, with the Dow Jones industrial average and the Standard & Poor’s 500 index posting small gains and the Nasdaq composite index falling.

UBS Warburg chief economist Maury Harris said the pace of job creation last month was only about one-third of what would be required to stabilize the unemployment rate.

The jobless rate probably will remain within a narrow range for several months, moving “up and down a little bit, but not down enough to get you Fed tightening before the election,” Harris said.

“This may not be a jobless recovery, but it’s going to be a low job-formation recovery,” he said.

It is not unusual for the unemployment rate to continue rising for several months after a recovery begins.

Employers tend to respond to initial signs of improvement by making their existing employees work longer hours and often delay hiring people until they have solid evidence the rebound is real.

In March, the average manufacturing workweek increased to 41.1 hours from 40.7 hours in February, while factory overtime rose to 4.2 hours from 3.9. The average wages of private-sector production workers went up 4 cents to $14.67 an hour.

Many economists predict that the jobless rate may rise as high as 6% in coming months before businesses begin bringing on new workers to satisfy increased demand for their products.

Government analysts characterized last month’s uptick in unemployment as relatively insignificant, noting that the jobless rate has remained within two-tenths of a percentage point of 5.6% since October.

But for some categories of workers, joblessness is an increasing problem. The unemployment rate for African Americans jumped to 10.7% in March from 9.6% the previous month. Among African American teens, the jobless rate was 31%, up from 27.9%.

Latino unemployment rose to 7.3% from 7.1%, while the rate for whites edged up to 5% from 4.9%.

Much of last month’s job growth was in the government sector, which added 37,000 employees. Of those, 27,000 were local school employees.

Total private-sector employment increased by 21,000 for the month.

Employment in service industries jumped by 118,000, the biggest monthly gain since the fall of 2000.

Temporary-help services added 69,000 people, health services 32,000, and engineering and management services 12,000.

Manufacturers continued to shrink their work forces, eliminating 38,000 payroll slots after paring 54,000 the previous month. But the job cutting has slowed sharply. Last year, factory employment fell by an average of 111,000 per month.

Electronic equipment makers cut 10,000 people in March, and industrial machinery manufacturers trimmed 7,000, much smaller reductions than in previous months. Small increases were reported by firms that make products from stone, clay, glass, primary metals, rubber and plastics.

Manufacturers of transportation equipment eliminated 12,000 jobs. Of those, 9,000 were in the aircraft industry. The number of construction jobs fell by 37,000, while mining employment dropped by 14,000.