Jobless Rate Climbs to 6 Percent in April

The nation's unemployment rate rose to 6 percent in April, its highest level in nearly eight years, the Labor Department reported today.

Still, employers expanded their payrolls for the first time in nine months. Economists said the report is consistent with an economy that is in the early stages of recovery.

The rise in the unemployment rate to 6 percent from 5.7 percent in March puts it at its highest level since August 1994, when the unemployment rate was also 6 percent.

Since employment is a lagging economic indicator, analysts said they were not alarmed by the jump in the jobless rate.

"After a year of businesses reducing payrolls, payroll employment is stabilizing," said Mickey D. Levy, chief economist at Banc of America Securities in The New York Times. "We are forming the base for future payroll increases. The unemployment rate should drift down over the spring and summer."

Reaction from the Bush administration was muted. Ari Fleischer, the White House spokesman, was quoted by Reuters as saying that "while today's jump was higher than private forecasters expected, it is not out of the usual as a part of a recovery."

Mr. Fleischer said the White House expects that as the economy recovers, business investment – which fuels hiring of new workers – will lag other segments of the economy and not revive until later in the year.

Last week the government reported that the economy grew at an annualized rate of 5.8 percent during the first quarter. But much of that gain was a result of factors not likely to be repeated over the balance of the year. As a consequence, most analysts expect the pace of the expansion to moderate to somewhere from 3 percent to 4 percent.

In April, employers outside the farming sector added 43,000 jobs to their payrolls, the first increase in nine months. But that gain may prove fleeting: the Labor Department's figures are usually revised.

Indeed, in its report today, the government reversed what it had initially reported for March. Instead of a gain of 58,000 in payroll employment in that month, the revised figures now show businesses actually shed 21,000 jobs.
The increase in overall employment was helped by a gain of 87,000 jobs in service-sector employment. In addition, temporary-help agencies added 66,000 positions in April, the third straight month of gains.

Companies often hire temporary workers before they hire new full-time employees or rehire workers that had been laid off.

But these and other job gains were offset by losses in areas like construction, which shed 79,000 jobs. Manufacturers, which were hit hardest by the recession, cut employment by 19,000 last month. But the pace of the decline in manufacturing employment is slowing.

The rise in nonfarm payrolls during April was not strong enough to take care of the 565,000 people who entered the labor force during the month. The increase in the size of the labor force was the cause of the rise in the unemployment rate.

Also, the rise in the unemployment rate was concentrated among adult women, whose jobless rate increased from 5.0 to 5.4 percent, pointed out Lois Orr, acting commissioner, Bureau of Labor Statistics.  The rate for adult men also edged up over the month.

Analysts said the numbers were not likely to persuade the Federal Reserve's policy-makers to shift their stance on monetary policy when they meet in Washington on Tuesday.

The data "confirm the worst is behind us," said Donald J. Fine, president of Fine Financial Forecasting. But the report "doesn't mean the Fed is going to tighten" monetary policy.

In Congressional testimony last month, Alan Greenspan, the Fed's chairman, indicated it would be some months before the central bank was likely to consider a change in monetary policy. During that testimony, Mr. Greenspan said the Fed needed to see additional signs of what he called a "sustained" recovery in the economy.

The employment report was not well received by the stock market. The Dow Jones industrial average fell sharply after the report was released, and other leading market indexes remained under downward pressure throughout the morning.

Around midday, the Dow was trading 116.46 points, or 1.2 percent, at 9,975.41. The Nasdaq composite index was down 36.74 points, or 2.2 percent, to 1,608.08. And the Standard & Poor's 500-stock index was down 13.52, or 1.3 percent, to 1,071.04.

The job report did set off some buying in the credit markets, where Treasury bond prices rose and long-term interest rates moved lower. Around midday, the Treasury's benchmark 10-year note was quoted at a price to yield 5.04 percent, down from 5.10 percent late Thursday.

"The stock market is down almost 10 percent since the last meeting of the Federal Open Market Committee," the Fed's policy-making body, said David Resler, chief economist at Nomura Securities International in The New York Times.

"At that point, the world was of the opinion the Fed was on the verge of tightening monetary policy," he said. "But this economy and the stock market are still on fragile ground. At current levels, short-term interest rates are not where they should be for the long haul. But this is no time to be moving them higher."