Following weak national employment growth last month, Massachusetts’ economy slowed further in March as employers shed jobs and workers gave up job searches.
Employers cut 5,500 jobs, the second consecutive month of losses for the state. Labor officials revised a initially reported 500-job increase to an 800-job decline, the Executive Office of Labor and Workforce Development reported Thursday.
The unemployment rate decreased to 6.4 percent in March, from 6.5 percent in February, but that was largely due to the more than 6,000 people who stopped looking for work in what is still a weak job market. Only those who actively seek jobs are counted as unemployed by state officials.
A Northeastern University economist, Alan Clayton-Matthews, blamed the weakness on federal budget decisions that allowed payroll taxes to rise at the beginning of the year and automatic, across-the-board spending cuts, known as sequestration, that went into effect in March.
“Tax increases and sequestration are slowing growth — growth that seemed to be strengthening in the beginning of the year,” Clayton-Matthews said.
Earlier this year, Massachusetts had regained the same number of jobs it had lost in the last recession, following a steady recovery that progressed faster than the nation’s and strong job gains in January.
The US economy also experienced weak job growth in March, and large numbers of workers gave up job searches. The US unemployment rate was 7.6 percent last month.
Clayton-Matthews cautioned against reading too much into one month’s worth of data. He said he expects slow but steady job creation through the rest of 2013.
He said last month’s slowdown may be due to a payroll tax increase that took effect earlier this year when Congress allowed a temporary tax cut to lapse, effectively taking money out of consumers’ pockets. Taxpayers earning between $50,000 and $75,000 a year will pay about $822 more in payroll taxes this year.
Additionally, the impact of automatic federal spending cuts is beginning to be felt. Massachusetts is particularly vulnerable because the state receives billions annually in federal defense and research spending.
Last month’s job losses were spread across a variety of sectors. The professional, scientific, and business services sector, which includes lawyers, architects, and engineers, lost 3,400 jobs. Information services lost 100. Government lost 400 jobs, while financial services lost 1,200.
Manufacturers cut 100 jobs last month. Construction, which has showed signs of a recovery, shed 1,100 jobs for the month but has gained 1,600 over the past year. Trade, transportation, and utilities lost 100 jobs during the month.
Education and health services added 2,200 jobs. Leisure and hospitality, which includes hotels, restaurants, and tourism businesses, gained 300 jobs in March.
Michael Goodman, a professor of public policy at the University of Massachusetts Dartmouth, said he expects slow and steady economic improvement this year.
The decline in the number of people looking for work may be due to retirements, younger workers opting to further their educations, or discouraged workers giving up job searches.
The number of long-term unemployed, those who have been job-hunting for at least six months, reached record levels in recent years. In Massachusetts, nearly 65,000 people were unemployed and looking for work for more than a year in 2012, includingmany older workers.
“Whether those are voluntary retirements or not, we don’t know,” he said.
“But overall, when we take a small step back like this, it’s disappointing.”