Unemployment rate drops to 5.5 percent; businesses add jobs for first time since July

WASHINGTON (AP) _ The nation's unemployment rate unexpectedly slipped to 5.5 percent in February as businesses, after slashing payrolls for six straight months, added 66,000 new workers. It was the

Friday, March 8th 2002, 12:00 am

By: News On 6

WASHINGTON (AP) _ The nation's unemployment rate unexpectedly slipped to 5.5 percent in February as businesses, after slashing payrolls for six straight months, added 66,000 new workers. It was the strongest signal yet that the country's first recession in a decade is over.

The Labor Department reported Friday that the jobless rate dropped by 0.1 percentage point in February to the lowest level since October. Before the report was released, private economists had been looking for the jobless rate to rise by 0.1 percentage point.

The addition of 66,000 jobs during the month followed losses that had averaged 146,000 a month since the recession started in March 2001. It was the largest payroll increase since February 2001.

President Bush ``thinks there are encouraging signs from a statistical point of view, but he remains concerned about people getting jobs and keeping their jobs,'' White House spokesman Ari Fleischer said.

The positive report sent stock prices sharply higher, with the Dow Jones industrial average up 134 points and the Nasdaq up 49 points in the first hour of trading.

The report supported other recent indications that the nation's economy is rebounding from the first recession in a decade. Federal Reserve Chairman Alan Greenspan on Thursday had offered his most upbeat assessment yet, saying recovery ``is already well under way.''

The job market improvements were announced as the Senate prepared to vote on a recession relief package that would extend regular 26-week unemployment benefits by 13 weeks and allow additional automatic extensions in states with high unemployment rates.

The House broke months of partisan gridlock Thursday and passed the legislation. President Bush has said he will sign the bill, which also gives businesses tax cuts, as soon as it clears the Senate.

The legislation would pump $51 billion into the economy this year, $43 billion next year and $29 billion in 2004, congressional analysts say. Its cost over 10 years is about $42 billion, because some tax breaks would generate government revenue in later years.

In the jobs report, the largest increases last month occurred in retail, though Labor Department economists stressed caution in interpreting the numbers as a sign of strength in that industry. Retail businesses added 58,000 jobs in February.

Large seasonal layoffs always occur in retailing in January and February following the holiday-season buildup. But holiday hiring last year was well below normal, so there were fewer workers to lay off.

Job gains also occurred in health services with 34,000 new jobs. And mild weather last month helped boost the number of jobs in construction by 25,000.

Manufacturing continued to shed jobs, losing 50,000 last month. But that was about half the average pace of the previous 12 months. Employment in motor vehicle manufacturing jumped by 26,000 last month, prompted by the reopening of automobile plants that had shut down for inventory control in January. Still, employment in auto manufacturing is down 63,000 over the year.

Employment in finance fell by 11,000 in February, the first loss in the industry since July. In that sector, security brokerages were hardest hit and employment has fallen by 45,000 since a peak in March 2001.

In transportation, job losses at airlines have slowed dramatically in the past two months, following a decline of 87,000 in the last quarter of last year.

About 40,000 jobs in the service sector were added last month. Temporary employment services were able to avoid losing jobs for the first time in nearly 1 1/2 years.

The drop in the unemployment rate came even as the work force grew. Overall, 821,000 people returned to the job market last month after nearly 1 million gave up looking for employment in January.