Bloomberg News

NEW YORK - Job cuts planned by U.S. businesses dropped in February from the year-earlier month, according to the employment firm Challenger, Gray and Christmas.

Businesses announced plans to cut 35,415 jobs last month, 43% fewer than the 61,870 in February 1999, Challenger said Tuesday. Last year, companies announced a total of 675,132 cuts, the report said.

February's layoff announcements were off 30% from January's, Challenger said. It was the sixth consecutive month that planned job reductions had fallen from the year-earlier levels. Cuts reached a 25-month low of 22,814 last October, according to the report.

Still, the report could be masking potential weakness in the months ahead, one of its authors said. "This could be the calm before the storm," said John Challenger, the firm's chief executive. "A new round of downsizing" could begin this year if growth slows because of rising gasoline prices, he said.

Challenger, a Chicago outplacement firm, tallies job-cut announcements monthly. It does not track unplanned layoffs, which may differ from announced figures.

"Companies are more inclined to right the ship through lowering head count before the Federal Reserve even has the chance to raise interest rates," Mr. Challenger said.

Announced layoffs were highest in the retail, industrial goods, computer, and services sectors, the report said. They were highest in the South and lowest in the Midwest.

The unemployment rate edged up to 4.1% in February from its 30-year low of 4% in January, the Labor Department reported last week. February's rate, however, was well below the 6.5% average during the past 20 years.

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