Major Jobs Disappointment

unemployment graphic
AP / CBS
The U.S. employment report for February proved to be a major disappointment. The jobless rate remained unchanged at 5.6 percent, and the economy was only able to generate 21,000 jobs.

The latest snapshot of the employment climate released by the Labor Department on Friday depicted the painfully slow job growth the country has been enduring.

Economists expected February payrolls to rise 130,000, according to a survey conducted by CBS MarketWatch. In the economic derivatives market run by Goldman Sachs, Deutsche Bank and ICAP were looking for a gain of about 140,000 new positions.

"Yuck," Joshua Shapiro, chief economist for MFR, told CBS Marketwatch.

In addition, the job gains in January were revised to show a pickup of just 97,000 positions, down from the 112,000 first estimated a month ago.

Nevertheless, the overall seasonally adjusted civilian unemployment rate stayed at 5.6 percent in February as thousands of prospective workers gave up looking for a job. Approximately 392,000 people left the civilian work force in February from January.

"Employers are still very, very cautious about adding bodies," said Bill Cheney, chief economist at John Hancock. "If you are out there looking for a job, this is bad news."

Payrolls have risen for six months in a row, but job growth has been tepid, averaging 61,000 a month, about half of what's need just to stay even with population growth.

The job climate is a major issue in this year's presidential race.

Slow job growth has been a sore spot for President Bush. Democratic presidential challenger John Kerry has seized upon this as evidence of what he contends is Bush's poor handling of the economy.

The economy, after struggling mightily to get back on its feet after being knocked down by the 2001, finally staged a material rebound in the second half of last year. But for out-of-work Americans, it hasn't felt like better economic times.

There were some 8.2 million people unemployed in February, with the average duration of 20.3 weeks without work. That marked the highest average duration of joblessness in over 20 years.

Manufacturers lost jobs for the 43rd month in a row in February. Factories cut 3,000 positions last month, but that marked a slower pace than the 13,000 cut in January.

Construction companies lost 24,000 jobs in February as bad winter weather in some parts of the country delayed projects. Leisure and hospitality firms cut 9,000 jobs in February.

Retailers, however, added 13,000 positions in February. Temporary help firms added 32,000 and education and health-care services gained 13,000 jobs last month.

Analysts want to see the economy generate around 200,000 or 300,000 net jobs a month on a consistent basis before they declare a recovery in the fragile labor market.

Federal Reserve Chairman Alan Greenspan is optimistic that job growth, which has been poking along, will speed up. "We could get a pop in employment at any time," Greenspan said last week.

Despite the backdrop of the sluggish job market, consumer confidence rebounded in early March as Americans felt better about their current financial situations as well as the economy's prospects in the months ahead, according to an AP-Ipsos index of consumers attitudes.

Since last June, the Fed's main lever to influence economic activity, called the federal funds rate, has been at 1 percent, a 45-year low. Near rock-bottom short-term interest rates have helped motivate consumers and businesses to spend and invest, an important factor to lift economic growth.

Most economists expect the Fed to hold rates steady when it meets next on March 16. Looking ahead, economists have mixed opinions about the direction of short-term interest rates. Some economists believe the Fed will start to push up rates this year. Others don't believe higher rates will come until 2005.

  • David Hancock

    David Hancock is a home page editor for CBSNews.com.