CBSN

U.S. Companies Cut More Jobs

GENERIC Unemployment, employment figures down, economy, jobs
CBS/AP
U.S. companies slashed 108,000 jobs in March following huge cuts the month before as war in Iraq battered the economy at home. But the overall civilian unemployment rate held steady at 5.8 percent.

Job losses were widespread last month, with essentially no hiring gains in any sector, the Labor Department reported Friday.

Analysts had expected more modest job cuts of about 40,000. In February, businesses cut 357,000 positions from their payrolls, more than previously reported.

The unemployment rate, which remained unchanged, has hovered around 6 percent since November 2001. The rate is calculated from a survey of households, while the payroll number is derived from a separate survey of businesses. That accounts for the fact that the seasonally adjusted overall rate remained unchanged from February, notwithstanding the job losses.

"It could have been worse," said Salomon Smith Barney senior economist Steven Whiting. "While the numbers are showing a deteriorating labor market, they are not nearly as severe as the February declines."

He told CBS News Radio he expects the jobless rate to flatten sometime in the second quarter.

The fact that the overall rate remained unchanged in March may have been the result of fewer people looking for work.

The department, in its calculation of the rate from the household survey, also tracks "discouraged workers," — people who report that they no longer are looking work because they don't think they can find a job.

The number of people in this category increased from 450,000 to 474,000 last month.

The war has stunted any recovery in the near term in the employment market. Even before it started March 20, businesses in this country had been wary of making long-term hiring and spending commitments as the economy struggled in its own right. War made for an even more uncertain economic environment.

Some economists think the dismal outlook could prompt the Federal Reserve to lower a key interest rate from the current 41-year-low of 1.25 at its meeting next month.

A big fear is that the worsening labor market will make consumers, essential to economic activity, more cautious in their spending.

After falling into a recession in 2001, the economy has struggled to recover, as three months of economic strength were followed by three months of weakness.

With economists predicting subpar growth for both the first and second quarters of this year, the labor market is likely to deteriorate further, economists say.

Job losses continued in manufacturing, which lost 36,000 positions last month. Employment in that sector has fallen by 2.5 million since a peak in April 1998.

The service sector, which is the engine of job growth in the United States, also was hammered last month. That category lost 94,000 jobs in March, following a 256,000 loss in February.

Employment also fell last month in government work, with a loss of 40,000 jobs. Most of that occurred in local education.