Washington, D.C., Mar. 5--U.S. employers added far fewer jobs to their payrolls last month than economists had expected, casting doubt on the momentum of the labor market's recovery.
Nonfarm business payrolls grew by 21,000 jobs in February, down from a revised 97,000 a month earlier, the Labor Department reported Friday. The unemployment rate held steady at 5.6%.
Economists had been expecting payrolls to grow by 125,000 jobs and for the unemployment rate to rise to 5.7%, according to a survey by Dow Jones Newswires and CNBC.
The labor-force participation rate plunged to a 15-year low of 65.9% amid a "steep" dropoff in the number of men in the work force, the department said. Thousands of workers just gave up looking for a job -- approximately 392,000 people left the civilian work force during the month.
The U.S. economy, as measured by gross domestic product, expanded by a robust 4.3% in 2003, and many forecasters say the rate could reach 5% in 2004. But employers have yet to start hiring workers at a 200,000-a-month pace that economists say is necessary to replace the 2.3 million jobs lost since 2001 and find work for new entrants into the labor market. Since August, nonfarm payrolls have grown at an average rate of just 60,700 a month.
Federal Reserve policy makers, under the circumstances, have said they're not inclined to raise interest rates quickly. The Fed's key interest rate now stands at a 45-year low of 1%, and Fed Chairman Alan Greenspan has said it eventually will have to rise. Many economists say, however, that the Fed cannot contemplate higher interest rates as long as the pace of job creation remains below 150,000. The central bank, as a result, isn't likely to raise rates this year, they say.
Indeed, the fed-funds futures contract for a quarter-point rate increase at the Fed's September meeting plunged to a 60% chance after the payrolls report was released from 100% at Thursday's close.
In its report Friday, the Labor Department revised its estimates of job growth for January and December, saying employers added fewer jobs than previously thought. Nonfarm payrolls grew just 97,000 in January, down from the initial estimate of a 112,000 gain. Payrolls growth was a mere 8,000 in December, half the previous estimate.
Most sectors saw slight job growth in February. The service industry added 46,000 jobs, fewer than the 77,000 jobs added in January. That included a 10,000 increase in professional and business-services jobs and a 13,000 increase in retail.
But construction payrolls declined by 24,000, manufacturing payrolls dropped by 3,000, and the leisure and hospitality industry shed 9,000 jobs.
Average hourly earnings rose three cents to $15.52; the average work week held steady at 33 hours and 48 minutes.
