U.S. employers added 110,000 jobs to their payrolls in March, the smallest increase since July, as businesses continued their reluctance to hire in the face of surging energy prices and rising interest rates.
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 reached since the Sept. 11, 2001, attacks. The rate was down from 5.7 percent a year earlier.
"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," Treasury Secretary John W. Snow said.
But many economists and labor-force experts were not as sanguine, noting that consensus forecasts had expected payroll increases well above 200,000 jobs. Employment in February was also revised downward by 27,000 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 rate last year, that business activity continues to expand, and that demand for goods and services remains strong.
"We're all scratching our heads" about why more jobs were not added, said Richard Berner, chief U.S. economist for Morgan Stanley.
But other economic news gave reason for concern. Wholesale gasoline prices surged yesterday by 6.7 cents, trading at record levels before settling to $1.73 a gallon. Crude oil also touched record prices, on a non-inflation-adjusted basis, ending up $1.87, at $57.27. In another economic report, the Institute for Supply Management said its index of prices paid by manufacturers jumped in March by the most in more than a year.
Those figures, coupled with rising long-term interest rates, sent the Dow Jones industrial average down 99.46. For the week, the Dow lost more than 38 points, the fourth weekly loss in a row.
For employers, concerns may be multiplying. Berner pointed to rising health insurance and pension costs as major hurdles to hiring. Challenger suggested that rising energy prices, inflation and the falling value of the dollar are also forcing employers to pull back on expansion plans.
"We've hit another oil-induced soft patch," said Richard A. Yamarone, director of economic research at Argus Research Corp., who unlike most analysts had anticipated weak hiring. "That's it, bottom line."
But nearly 3 1/2 years into the 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.
"This has been going on for a long time," Levy said. "That story is starting to wear thin."
Gary Burtless, a labor economist at the Brookings Institution, noted that since the last economic peak in 2000, a striking demographic shift in the labor market has occurred. There has been a 3.4 percentage point increase in the number of 55- to 64-year-olds holding jobs but a 2 percentage point decline in the workforce participation of 25- to 34-year-olds. Younger workers, aged 20 to 34, have left the labor market in droves, Burtless said.