Unemployment Data Surprises Economists

N E W   Y O R K, March 8 -- The odds-makers on Wall Street were wrong again.

Most bet unemployment would rise last month. Instead, for the second straight month, it fell. The nation's unemployment rate slipped to 5.5 percent in February, according to Labor Department data out today.

For the first time in seven months, the economy created more jobs than it lost. There were gains in construction, in retailing, in health-care services, and in mortgage banking.

At the same time, fewer jobs were lost in industries hardest hit by the recession, such as manufacturing and air travel.

For Jim Braun, 37, that resilience is welcome news. He is one of 1,200 flight attendants United Airlines is rehiring, after massive layoffs post-Sept. 11.

"I didn't expect to get called back so soon because I thought it was going to take a longer time for things to get back," says Braun, adding, "So I was very happy."

Uptick Is Sign of a Rebound

Economist Bruce Steinberg acknowledges "economists and also Wall Street were not looking for either consumers or businesses to be as resilient as they are proving to be."

But the uptick is clearly a sign the economy is on the rebound, says Cary Leahy, senior economist at Deutsche Bank in New York. "It's the last signal that the economy has turned, the recession's over and a recovery is beginning."

And the data was confirmation to traders that the economy has bounced back, believes Michael Metz, portfolio manager at CIBC in New York. "Now the market is adjusting to a more optimistic outlook for the economy over the next few quarters," he says.

Notes Richard Rippe, chief economist at Prudential Securities in New York: "The fears that the unemployment rate was going to skyrocket to 7 percent or something like that which were prevalent back a few months ago are not going to be validated."

Still Some Caution on Job Growth

Yet economists say it could be a while before job growth gets back to levels typical of a truly strong economy, more like 200,000 a month than the 66,0000 recorded in February.