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March Job Growth Disappoints

By Jonathan Weisman
Washington Post Staff Writer
Friday, April 1, 2005; 12:29 PM

U.S. employers added a disappointing 110,000 jobs to their payrolls in March, the smallest increase since July, as businesses continued their reluctance to hire in the face of strong economic growth and rising profits.

The monthly Labor Department jobs report did show the nation's unemployment rate falling to 5.2 percent, a level last seen in January but not consistently enjoyed since the Sept. 11, 2001, attacks. The jobless rate was down from 5.7 percent a year ago.

_____On the Web_____
Bureau of Labor Statistics: March 2005 Employment Situation Report

"Today's announcement that the unemployment rate fell to 5.2 percent and 110,000 new jobs have been created is good news for the direction of America's economy," said Treasury Secretary John W. Snow.

But most economists and labor-force experts were not as sanguine, noting that more forecasts had expected payroll increases well above 200,000 jobs last month. Employment growth in February was also revised downward by nearly 20,000 jobs.

"Some will point to the addition of 110,000 jobs as being good news, but it falls well short of Wall Street expectations," said John A. Challenger, chief executive of Challenger, Gray & Christmas, Inc., a global employment firm.

The small payroll numbers came on the heels of news that the economy grew at a healthy 3.9 percent last year, that business activity continues to expand, and demand for goods and services remains strong. William Dudley, an economist at Goldman Sachs, cautioned not to read too much into monthly job data that may simply indicate the economy is growing at a steady, sustainable pace.

But others were baffled.

"We're all scratching our heads," said Richard Berner, chief U.S. economist for Morgan Stanley Dean Witter.

Berner pointed to rising health insurance and pension costs as major hurdles to hiring. But temporary employment -- which avoids such costs -- has been sluggish during the past two months. Challenger suggested that rising energy prices, inflation and the falling value of the dollar are forcing employers to pull back on hiring plans.

But nearly 3 1/2 years into the current economic recovery, none of these explanations suffice, said Frank Levy, a labor economist at the Massachusetts Institute of Technology. For at least two years, economists have said employers were burned by over-investment and unwise expansions in the boom years of the late 1990s, then clobbered by the 2001 attacks. The lesson was to do everything they could to grow their businesses before turning to new hiring.

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