Jobs Growth Slowed in February

Updated from 9:23 a.m. EST

The number of jobs generated by U.S. employers slowed significantly in February, helping to bump the nation's unemployment rate to 4.1%, the Labor Department reported Friday.

The tempered job growth was driven by slower hiring in the construction sector, which helped to bring overall hiring to its lowest level in nine months.

Over all the nation's non-farm employers added 43,000 jobs in February, compared with a 384,000 rise in January. That surprised economists polled by Reuters who had been looking for a gain of 206,000. February's gain is the smallest since last May, when 28,000 new jobs were added.

Slower job growth also precipitated a smaller-than-expected rise in workers' wages, easing concern that tight labor markets might be spurring inflation by exerting pressure on salaries. Average hourly wages grew 4 cents to $13.53, boosting annualized wage growth slightly to 3.6% from 3.5% in January.

The job growth data provided some relief for financial markets, which have been under pressure for fear that Federal Reserve policymakers will continue to raise interest rates until they see the torrid pace of the economy slow.

A separate report Friday from the Commerce Department added to the argument by showing that orders for manufactured goods from U.S. factories dropped in January.

The Dow Jones Industrial Average climbed 202.20, or about 2%, to end the day at 10367.28. The Nasdaq Composite index rose 160.79, or about 3.4%, to close at 4,855.28. The price of the 30-year Treasury bond rose slightly, pushing its yield down to 6.12% from 6.14% Thursday.

But given other measures of still-robust economic activity such as retail sales and lofty stock market valuations, one month of slower hiring may not be enough to stop the Fed from raising rates in the short-term.

The Fed's policy committee will next meet March 21, and most economists are expecting the Fed to bump its key lending rate to 6% with a quarter percentage-point increase, adding to the full percentage point that the Fed has added over the past 10 months.

Despite those hikes, the economy grew by 6.9% in the fourth quarter of 1999. Fed Chairman Alan Greenspan has repeatedly cautioned that such strong growth is spurring a strong likelihood that inflation will result from tight labor markets, growing wages and rampant consumer demand.

But the slower jobs growth in February could be a sign that the Fed's efforts are starting to take hold of the economy. The weakness in employment was distributed across various sectors of the job market. The service sector added 62,000 jobs, compared with an average of 232,000 over the previous 12 months. The manufacturing sector added 5,000 jobs after adding 21,000 in January. And the construction sector, where an extraordinarily large 116,000 gain in January contributed heavily to a total gain of 384,000, lost 26,000 jobs last month.

The February result brings the average payrolls gain over the last 12 months to 216,000.

Equally encouraging was a slight uptick in the unemployment rate, which edged up slightly to 4.1% after it dropped to a 30-year low of 4.0% in January. It had been expected to hold steady. A higher unemployment rate also takes pressure off the Fed to raise interest rates.

The augmented unemployment rate, a more complete measure that Greenspan has recently embraced, also rose, from 6.85% to 6.99%.

The drop in orders for manufactured goods was for both durable goods -- those that typically last for more than three years -- and non-durable goods.

Overall, factory orders fell 1.1% in January, the first contraction since October and the sharpest decline since last April, when orders fell 1.4%.

The fall in January orders was led by orders for electronic equipment, which fell 12.9% in January after a 5.5% gain in the previous month. Orders for transportation equipment fell 4.0% in January after rising 23.9% in the previous month, helped by a decline in aircraft orders.

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