WASHINGTON — The nation's unemployment rate climbed to 4.3 percent in March, the highest level in 20 months, as businesses cut 86,000 jobs. The payroll reduction was the largest since the end of 1991.
The jobless rate rose 0.1 percentage point from a 4.2 percent rate in February, the Labor Department reported Friday. That matched many analysts' expectations. The unemployment rate last stood at 4.3 percent in June and July of 1999.
The plunge in payrolls last month marked the first decline since August 2000, when payrolls fell by 79,000. The weakness was widespread, with losses at bars and restaurants, department stores, car dealers and temporary employment services. But manufacturers continued to be the hardest hit. The decline in total payrolls followed a 140,000 gain in February, according to revised figures.
The latest snapshot on employment increases anxiety that the foundering economy might topple into a full-blown downturn, economists said.
"Yes, it raises recession fears, but it doesn't necessarily mean we're in a recession or that we will enter an official recession," said Paul Kasriel, chief economist at Northern Trust Co. "One of the missing ingredients to evidence of a full-fledged recession has been the relative strength of employment growth, which is ebbing now."
Wall Street didn't take kindly to the employment news. After rising more than 400 points Thursday, the Dow Jones industrial average was down 176.06 at 9,741.99 in early trading Friday. The NASDAQ composite, which gained 146 points Thursday, also fell early Friday, moving down 65.56 to 1,719.44.
The decline in new jobs last month marked a much weaker performance than many analysts were expecting. They were forecasting a gain of around 50,000 in payrolls. The 86,000 drop was the largest since November 1991, when payrolls plummeted by 94,000.
Manufacturing, which has been bearing the brunt of the economic slowdown, lost a huge 81,000 jobs last month, with cuts affecting a wide range of industries — from auto manufacturing to industrial machinery production. Since last June, lost factory jobs totaled 451,000.
Many analysts believe manufacturing is already in a recession and some worry the weakness is spreading and will end the nation's record-long stretch of uninterrupted growth, which started its 11th year in March.
"The cancer is beginning to metastasize and is starting to spread to other parts of the economic body," Kasriel said.
Seeking to prevent the economy from toppling into recession, the Federal Reserve has cut interest rates three times this year, totaling 1.5 percentage points. Economists said Friday's report raises the odds that the Fed would lower interest rates again before its next scheduled meeting on May 15.
The Fed's rate reductions are designed to rejuvenate economic growth. But President Bush says more needs to be done, namely quick enactment of his $1.6 trillion tax cut.
Economic growth slowed to an annual rate of just 1 percent in the last three months of 2000, the weakest performance in more than five years. Many analysts believe the economy continued to lose altitude in the recently ended first quarter, and a few believe it actually stalled or slipped into reverse.
The unemployment rate dropped to a 30-year low of 3.9 percent during three months of last year, reflecting the strength of the red-hot economy during the first half of 2000. However, 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 March by 0.4 percent to $14.17 an hour, slightly faster than many analysts were expecting, but down from a 0.6 percent increase the month before. The length of the average workweek edged up to 34.3 hours from 34.2 hours in February.
Some companies are coping with the weak economy by sharply cutting production, leading to reductions in workers' hours and overtime, and forcing thousands of layoffs.
DuPont announced this week that it would cut 4,000 jobs. That followed earlier announcement of other layoffs from some of the biggest names in U.S. business, including DaimlerChrysler, Motorola, Lucent Technologies and Procter & Gamble.
The service sector, normally the engine of job creation in the United States, actually lost jobs last month, with employment falling by 19,000. A huge drop of 83,000 jobs was reported for temporary help firms, which has seen employment fall for six straight months, losing 273,000 jobs over that period.
Retailers cut 46,000 jobs last month, offsetting much of the increase posted in February. Employment at bars and restaurants declined by 25,000. Department stores cut 19,000 jobs and automotive dealers and service stations lost 6,000.
There were a few bright spots in the report. Construction firms added 12,000 jobs in March, bringing the total jobs added since October to 148,000. Health care firms saw employment rise by 26,000, social services positions grew by 15,000, computer services were up by 11,000.