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Following weak national employment growth last month, Massachusetts’s economy slowed further in March as employers shed jobs and workers gave up job searches.

Employers shed 5,500 jobs, the second consecutive month of losses for the state, after labor officials revised a initially reported 500-job increase to and 800 job decline, the state Executive Office of Labor and Workforce Development reported Thursday.

The unemployment rate slipped to 6.4 percent in March, 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 labor officials.


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 to go 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 regained all the jobs it lost in the last recession after a steady recovery that progressed faster than the nation as whole and very strong job gains in January. Nationally, the US economy also experienced weak job growth in March and large numbers of workers giving up job searches. The US unemployment rate was 7.6 percent last month.

Clayton-Matthews cautioned against reading too much into one month of data, which can be volatile. 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 a year 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 over the month. Information services lost 100 jobs in March. Government lost 400 jobs. Financial services lost 1,200 jobs in March.

Manufacturers cut 100 jobs last month. Construction, which has showed signs of a recovery, shed 1,100 for the month, but has gained 1,600 jobs 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 at 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 retiring workers, younger workers opting to further their education, or discouraged workers giving up job searches.

The number 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, including many 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.”

Megan Woolhouse can be reached at mwoolhouse@globe.com. Follow her on Twitter @megwoolhouse.