The tentative economic recovery nearly came to a halt last month as payrolls shrank for the first time in five months, the Labor Department said Friday.
The economy is growing too slowly to create jobs, but it does not appear to have lapsed into a new recession, economists said. Wages kept rising last month, the workweek grew longer and the unemployment rate -- which is based on a different survey other than the payrolls number -- fell slightly, to 5.6 percent, its second consecutive drop.
"The best way to describe the recovery is anemic," said Ethan S. Harris, one of two chief economists at Lehman Brothers. "From the point of view of an average person, we're still in a recession. What the average person cares about is jobs."
Calling the data confusing while being relieved it was not worse, investors and economists said the jobs report would make the Federal Reserve unlikely to cut its benchmark rate before the midterm elections. Some analysts said they believed there is now only about a 50 percent chance the Fed will try to encourage fresh spending by cutting the rate when it meets Nov. 6, the day after the elections.
As the broadest measure of economic activity in September, the jobs report offered clear evidence that the economy was stumbling again, after seeming earlier this year to have left behind the recession that lasted most of last year.
Most stocks fell Friday, and the Dow Jones industrial dropped 2.5 percent, to 7,528.40, its lowest close since November 1997.
Last month, the economy lost 43,000 jobs as companies seemed to become nervous about the possibility of a new recession. Many businesses are still saddled with too much capacity, consumer spending has slowed, and a potential war in Iraq has made managers uncertain about oil prices and the broader economy. It was the biggest decline since February, the end of the large post-Sept. 11 layoffs.
Manufacturers have accelerated their cutbacks in the last two months, after showing signs of ending their two-year slump earlier in the summer. Temporary-help agencies, which are often seen as a leading indicator, all but stopped hiring workers last month after having added workers in the spring, the Labor Department said.
Economists generally put more stock in the payroll numbers because the survey that produces them covers 300,000 factories and offices, and about 37 million of the nation's 131 million jobs. The unemployment rate comes from a survey of 60,000 households, and its drop of 0.1 percent contradicted other recent signs of more layoffs, like a rise in jobless-benefit claims and a decline in help-wanted advertising.
Labor Department officials emphasized Friday that the decline in neither payrolls nor the unemployment was statistically significant. That suggested the labor market is stagnant.
The report could complicate the campaign strategies of both Democrats and Republicans. With a fall in the unemployment rate, the nation's best-known economic statistic, the economy is unlikely to overwhelm Iraq as a campaign issue, as many Democrats would probably like. At the same time, almost a month of disquieting economic news has made the recent optimism of top Bush administration officials appear more shaky.
Speaking at a Republican campaign rally in Boston on Friday, President Bush called the drop in the jobless rate good news. "But that's not good enough," Bush said. "There are still too many people who wonder whether or not they're going to be able to find employment."
In a sign of the labor market's weakness, the average spell of unemployment jumped about 11 days last month, to 17.8 weeks, the longest since 1994. Almost 1.6 million people still looking for work have been without a job for at least six months. Others have stopped looking for work and are not counted as unemployed by the government.
A mostly Democratic group of senators has introduced a bill to extend unemployment benefits so that they would last about as long as they did during the recession of the early 1990s. Many benefits are set to expire at the end of the year.
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