- The Washington Times - Saturday, February 8, 2003

Unemployment unexpectedly fell last month to 5.7 percent from an eight-year high of 6 percent as businesses started hiring again for the first time in months, the Labor Department reported yesterday.

The surprising signs of life in the economy, with jobs increasing by 143,000 last month, stoked a brief rally on Wall Street. But it was quickly beaten back by fear that a war with Iraq and high oil prices are undermining the fragile recovery. Crude oil hit a two-year high of more than $35 a barrel in New York trading yesterday.

President Bush hailed the good jobs report as he swore in John W. Snow as his second Treasury secretary.

"The economy is in its second consecutive year of growth, yet it is not growing fast enough" to create the thousands of jobs needed to keep the recovery on track, he said.

Mr. Bush said his proposal to accelerate the 2001 income-tax cuts would put money in the hands of millions of small-business owners, who traditionally create the most jobs. He charged Mr. Snow and the rest of his Cabinet with increasing public and congressional support for the proposals.

Alfred Broaddus, president of the Federal Reserve Bank of Richmond, called the jobs report "encouraging" and suggested that growing job opportunities are as important to the central bank as they are to Mr. Bush and the public.

"To get a solid, ongoing business expansion you have to have stronger growth in employment," he said. The job gains seen in January after two months of declines are "a good start" and should dispel some "skepticism" about the recovery. Economists cautioned not to read too much into the January jobs increase, noting that it was not big enough to offset 237,000 in net job losses in the two previous months.

In addition, two-thirds of the rise was due to a statistical fluke caused by the Labor Departments adjustment of hiring figures it receives from businesses to factor out seasonal fluctuations.

Because of the weakest Christmas season in years, retailers did not hire as many temporary workers as usual in December, causing the department to calculate a 100,000 "drop" in retail employment. But that loss was reversed in January because retailers had fewer temporary workers to let go.

"The report is not as exciting as it seems on the surface," said Sung Won Sohn, chief economist with Wells Fargo & Co.

Not only was the rebound in retail hiring a "mirage," he said, but the drop in unemployment also may have been a result of a statistical illusion caused by the departments switch to more recent population estimates last month than those used in previous years.

Still, the report contained several encouraging signs of stabilization in the job market, he said, including a small rise in the average workweek and the first month in more than two years without job losses in the goods-producing sector.

Joel Naroff of Naroff Economic Advisers said the report provided welcome proof that "the job market has not collapsed," but he said he expects continuing concerns about Iraq to block a return to robust hiring.

"Firms will not start gearing up until the war situation is resolved," he said. "Going into any war, we have some strength to lean on, it is how we come out of it that matters," he said.

The looming war overshadowed hopes for recovery inspired by the report on Wall Street. After rising sharply on release of the report, the Dow Jones Industrial Average fell back on belligerent talk from the White House and rising oil prices. It ended down 65 points at 7,864. The dollar also resumed its decline against the euro and other currencies after briefly rallying on the job news.

"Theres no way wed get a number like this in the past that we wouldnt see a rally in the equity market," said Michael Gurka, senior market strategist at Man Financial Inc. "I think its mostly because of whats looming in the next week or so overseas."

Despite the dip in unemployment, the report showed that long-term joblessness remains a problem for many because of the virtual hiring freeze by businesses in the past two years.

Workers who have gone without a job for six months or more totaled 1.7 million about the same number as those who saw their jobs cut by employers in the past two years.

"For unemployed workers, the recession has been much worse than previous recessions," said Maurice Emsellem of the National Employment Law Project.

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