Jobless rate drops despite slow hiring

WASHINGTON -- It's a bumpy road that America's unemployed are traveling.

Just a month after hopes were raised of better days for job seekers, companies were stung by higher energy bills, making them more cautious in their hiring.

Only 110,000 new jobs, the fewest in eight months, were added nationally in March. Still, that was enough to push the unemployment rate down.

The newest jobs report, released Friday by the Labor Department, offered a mixed picture of the country's hiring climate. The labor market has been one piece of the economy that has struggled the most to get back to full throttle after the 2001 recession.

"America is not flicking on the hiring switch," said Richard Yamarone, economist at Argus Research Corp. "Right now businesses have to contend with skyrocketing energy and commodity costs, but there is little they can do about that. The one big cost that they can control is labor. That is being done by tightening the hiring reins."

Nevertheless, the labor market was able to accommodate enough people to drop the unemployment rate from 5.4 percent to 5.2 percent, matching January's figure.

Payroll growth, as measured by a survey of businesses, slowed in March. Job losses at factories and in the retail sector tempered gains in professional and business services, construction, education and health services and in other industries.

All told, March's payroll gain of 110,000 was roughly half the number economists expected. That was down from February's 243,000 new jobs, the biggest gain since October.

The seasonally adjusted overall civilian unemployment rate, which dropped to 5.2 percent in March, is based on a survey of 60,000 households. It showed that 357,000 people said they found employment last month, outpacing the number of people who couldn't find work.

Economists tend to put more stock, however, in the much broader business survey of 400,000 work sites that is used to calculate the payroll figures. The two surveys often offer seemingly conflicting pictures of what is happening in the labor market.

In other economic news:

--Manufacturing activity grew at a slower pace in March, while the service sector, such as financing and insurance, soared, according to a pair of reports from the Institute for Supply Management.

--Construction spending rose 0.4 percent in February to a record seasonally adjusted annual rate of $1.05 trillion, the Commerce Department said.

On the jobs front, Federal Reserve policy-makers say the labor market is gradually improving.

But for people looking for work, it can be difficult. There were 7.7 million people unemployed in March with the average duration of 19.5 weeks without work, the highest since November.

The share of the working-age population working or actively seeking a job in March held steady at 65.8 percent, a nearly 17-year low first reached in January. And, the number of people who could find only part-time work rose sharply, as did the number of self employed.

"It wasn't a banner month for the average American worker," said Mark Zandi, chief economist at Economy.com. "The job market is not in full swing."

The economy in the first three months of 2005 grew at an annual rate of 4 percent or higher, according to some projections. Economic growth probably will slow a bit in the current April-to-June quarter but should still remain at a healthy pace.

Economists want to see the economy producing around 200,000 jobs a month on a steady basis to feel better about the labor market. It's unclear the extent to which high costs for energy and raw materials will weigh on payroll growth in the coming months, they said.

Oil prices, which had climbed into record-high territory on March 18 at $56.72 a barrel, set a new all-time high Friday of $57.27 a barrel.

Fed policy-makers have raised rates seven times since last June to keep inflation under control. An additional increase is expected at the Fed's next meeting, May 3.

Workers' average hourly earnings in March rose to $15.95, a 0.3 percent increase from the previous month. From an economic point of view, the modest increase didn't signal wage inflation, analysts said. From a worker perspective, though, it seems hard to get ahead.

"The good news is that hourly earnings went up. The bad news is that the pickup in overall inflation has eroded all of those wage gains and then some," said Ken Mayland, president of ClearView Economics.

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Employment report: http://www.bls.gov/