U.S. unemployment rate rose to 6.5% in February


ANNAPOLIS -- The nation's jobless rate reached a four-year high in February with a dramatic three-tenths of a percent increase to 6.5 percent, the Labor Department reported yesterday, and the Federal Reserve Board responded by easing an important interest rate to jump-start the stalled economy.

The disappointing unemployment figures, the highest one-month spike in five years, showed the economy continued to decline during the Persian Gulf war.

In Maryland, which lags a month behind the federal government in reporting employment data, January's unemployment rate was percent, the highest level since January 1984, the state Department of Economic and Employment Development said yesterday. In December DEED reported a 6.0 percent jobless rate, but yesterday it revised that figure upward to 6.1 percent. Maryland's data are not adjusted to reflect seasonal differences, whereas the national figures are adjusted.

Economists said the state figures were a positive sign because unemployment almost always increases from December to January.

Unemployment in the Baltimore area actually fell 0.5 percent in January, to 6.4 percent, largely because of a major recall of auto workers, the state said. Baltimore city's jobless rate dropped to 9.1 percent from 10.0 percent in December.

"I think it's encouraging because normally unemployment does go up in January" following the Christmas selling season, said Pat Arnold, director of DEED's Office of Labor Market Analysis and Information.

In January, total employment fell by about 14,000 workers, the office reported, but the rate remained the same because almost 13,000 people left the labor force. A total of 1,303 people joined the ranks of the unemployed.

Nationwide, 440,000 people became unemployed in February, according to the U.S. Department of Labor, for a total of 8.2 million people out of work.

The Fed quickly reacted by pumping cash into the economy and lowering the federal funds rate -- the overnight rate at which banks lend each other money -- by 0.25 percent to 6.0 percent.

"They feel like they've got to stimulate spending a little faster," said Stanley Duobinis, a senior vice president at WEFA Group Inc., in Bala Cynwyd, Pa. "They're just doing already what we guessed they would do."

It was the third time the central bank has cut interest rates this year and came about three hours after the report of a 6.5 percent unemployment rate in February. The jobless level was up from 6.2 percent in January.

"The more aggressive actions the Fed has begun to take in past months has certainly been warranted and are quite sensible," Michael Boskin told Reuters news service.

"They should help mitigate the downturn and help the economy start to recover later this year," he added.

The monthly increase in the jobless rate was the steepest in five years and was accompanied by a sharp drop in employment outside the farm sector.

In December, Maryland reported that the state's unemployment rate rose to 6.0 percent from 5.3 percent, but the revised figures now show November's rate was 5.7 percent. The December increase was the third straight monthly jump in the jobless rate, and gave the clearest signal yet that Maryland was deep in a recession.

"If you wanted to be a real optimist you could say the recovery's set in," Mr. Arnold said, adding, "I don't think anyone's that optimistic, though."

In fact, University of Maryland economists predicted the state's economy will not show signs of recovery until summer. "Service employment in the region and the nation is growing slowly," said Lorraine Monaco, an instructor in the University's economics department, and co-author of a report to be released next week on Maryland's economy.

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