Jobless rate lowest since 2001 in state

Massachusetts employers last month cut payrolls for the first time in a year, even as the state jobless rate dove half a percentage point to its lowest level since September 2001.

The state lost 5,100 payroll jobs in August, ending 11 consecutive months of job gains and reversing much of July's strong increase of 8,400 jobs, the state Department of Workforce Development reported yesterday. Even so, the unemployment rate fell to 4.2 percent, from 4.7 percent in July.

The contradictory data result from the separate surveys used to estimate payroll employment and the jobless rate, which sometimes diverge. Payroll employment is estimated from a survey of businesses, while the jobless rate is based on a survey of households.

The data also tend to be volatile, made more so in the past two months by statistical adjustments for seasonal variations in employment. Elliot Winer, chief economist at the state Department of Workforce Development, said both August's job losses and July's gains were probably overstated, as was August's decline in the jobless rate.

Still, Winer said, the state has added 3,300 jobs in the last two months, and almost certainly whittled the unemployment rate, which is consistent with the pattern of modest employment growth over the last year. The state has added nearly 30,000 jobs since August 2004, a growth rate of about 1 percent.

''We're still moving up, not dramatically, but we're adding jobs," Winer said. ''The trends are still encouraging."

The state's labor market has recovered only slowly from the last recession, and has significantly lagged the nation's. Despite having added 44,000 jobs since the labor market began to recover in early 2004, the state still has 163,000 fewer jobs than at the pre-recession peak.

The United States has regained as many jobs as were lost in the recession.

In Massachusetts, said Jim Klocke, executive vice president of the Greater Boston Chamber of Commerce, key sectors like financial services and technology have yet to regain the momentum that drove the expansion of the late 1990s and pushed the state unemployment rate to record lows.

Financial services, for example, resumed employment growth this year, adding about 800 jobs in the last six months. But employment in the sector is still flat from a year ago, and down 12,000 from its recent peak.

''We're in better shape than we were a year ago, but we still have a long a way to go," Klocke said.

Andre Mayer, senior vice president for research at Associated Industries of Massachusetts, said the national economy, while growing solidly, may not be expanding enough to lift Massachusetts, which is weighed down by high costs. A number of studies, including one released last week by the Boston Foundation, have found the state to have among the highest business and living costs in the nation.

''You need pretty good assurance that growth is going to be sustained before employers in a high-cost environment like Massachusetts start adding people," Mayer said.

Economists still expect the slow pace of job growth to continue in Massachusetts.

Alan Clayton-Matthews, a public policy professor at the University of Massachusetts at Boston, said employment in the technology-dominated manufacturing sector has held steady over the last year, which, because of strong gains in productivity, indicates that demand for technology products remains solid.

''The economy is growing, but it's not going gangbusters," he said. ''And maybe this is as good as we can expect in this recovery."

Robert Gavin can be reached at rgavin@globe.com.