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Jobless rate is holding steady

WASHINGTON — The nation's unemployment rate held steady at 4.2 percent in February, and a bigger-than-expected number of jobs were created even as manufacturing continued to shed workers.

The Labor Department reported Friday that 135,000 workers were added to total payrolls last month, down from the 224,000 jobs added the month before but well above the increase many analysts were expecting. They were forecasting a gain of around 75,000.

Continued big losses of factory jobs tempered gains elsewhere, including increases at service companies, retailers and health care providers.

The report did little to cheer Wall Street. Stocks fell sharply, responding to a profit warning issued from Intel late Thursday. The Dow Jones industrial average plunged 169 points, and the NASDAQ lost 86 in the first hour of trading.

Seeking to prevent the faltering economy from slipping into a recession, the Federal Reserve slashed interest rates twice in January, totaling a full percentage point. Many analysts believe the Fed will cut rates a third time at its next meeting March 20.

Economists said Friday's report paints a picture of an economy that is still weak but is not in a free-fall.

"There's nothing here that screams recession," said Bill Cheney, chief economist at John Hancock.

Analysts said that the jobs figures wouldn't deter the central bank from cutting interest rates in March, but they continued to be split over whether it would be by another half-point or a more moderate quarter point.

"This performance is more consistent with a soft landing than a hard landing for the economy as a whole," said Ken Mayland, economist with ClearView Economics. Still, he said, job growth clearly has cooled along with the economy. "There's less of an appetite for workers. We were cruising along with big monthly increases in jobs last year, and now there's a decidedly different environment."

The unemployment report comes one day after the House passed the heart of President Bush's tax relief plan, an across-the-board reduction in income tax rates. Supporters say the cut will help rev up the economy.

Overall economic growth slowed to an annual rate of just 1.1 percent in the fourth quarter, the weakest performance in more than five years. Fed Chairman Alan Greenspan told Congress the economy was close to "stalling out" at the beginning of the year.

The unemployment rate dropped to a 30-year low of 3.9 percent during three months in 2000. With the slowdown, economists are forecasting the jobless rate to rise in the coming months, peaking at around 4.5 percent.

Average hourly earnings, a key gauge of inflation, rose in February by 0.5 percent to $14.10 an hour, faster than the 0.3 percent increase many analysts were forecasting.

Some companies have struggled to cope with the weakening economy by trimming payrolls. Intel announced Thursday that it would cut 5,000 jobs. That followed earlier announcements of thousands of other layoffs from some of the biggest names in U.S. industry, including Dell Computer, DaimlerChrysler and Sears.

In February, manufacturers, which are bearing the brunt of the economic slowdown, continued to cut jobs, shedding 94,000 workers and bringing the total loss of factory jobs to 371,000 since June. With the exception of automobile manufacturing, where some workers returned from temporary layoffs, employment declines in manufacturing were widespread.

But in the service sector, generally the engine of job creation in the United States, 95,000 jobs were added during February. Health care services had the largest increase.

Retailers added 37,000 to their payrolls during February, following two months of very small gains. Construction companies added 16,000 workers, following a whopping 158,000 new jobs created during an unusually mild weather spell in January. That was a big factor in January's big payroll gain.