WASHINGTON — The nation’s overall unemployment rate dropped to 5.7 percent last month, but the employment situation and pace of economic growth is still not satisfactory.

That was the message delivered by economists and President Bush on Friday.

The increase of 143,000 jobs, primarily in the retail sector, was the largest since November 2000, according to the Labor Department’s monthly jobs report. The apparel and textile industries continued to shed jobs in January, but the retail sector added seasonally adjusted jobs, which partially contributed to a drop in the nation’s overall unemployment rate to 5.7 percent from a nine-year high of 6 percent in December.

However, one contributing factor in the more upbeat report was a change in the way the Labor Department compiles its survey of households, which is used to calculate the unemployment rate.

President Bush also weighed in on the economy and employment on Friday with the submission of his annual economic report to Congress and the swearing in of a new chief economic advisor, Treasury Secretary John Snow. The President used the annual economic report to push for his tax proposals, which would accelerate and make permanent the $1.35 trillion, 10-year tax cut he won from Congress in 2001, plus enact a number of new proposals intended to stimulate savings.

Democrats assert that Bush’s economic policy has resulted in the loss of nearly 2 million jobs since he came into office. Critics also claim the President’s tax proposals are too expensive, as evidenced in the administration’s budget released Monday, which forecasts record deficits of $304 billion this year and $307 trillion next year.

In his two-page message to Congress on Friday, Bush said a free-market system in the U.S. was the key factor in the country’s rebound from recession, terrorist attacks and corporate scandals. He pointed to low inflation, low interest rates and strong productivity gains, but also acknowledged weaknesses in the economy, claiming "the pace of the [economic] expansion has not been satisfactory. There are still too many Americans looking for jobs."

Despite the seemingly positive employment report, most economists argued seasonal adjustments skewed the January numbers.

After cutting a total of 4,000 jobs from payrolls in December, department stores did an about-face and added a seasonally adjusted 13,000 jobs in January to employ 2.5 million. General merchandise stores added 11,000 jobs in January against December to employ 2.83 million workers.However, department stores and merchandise stores were still well below year-ago employment levels. Compared with January 2002, department stores last month had 20,000 fewer jobs, while general merchandise stores had 26,000 fewer jobs.

Apparel and accessories stores, which added 12,000 jobs in December, trimmed payrolls by 1,000 jobs in January to employ 1.17 million. Compared with January 2002, apparel and accessories stores lost 14,000 jobs.

Rajeev Dhawan, director of the economic forecasting center at Georgia State University, warned not to read too much into the January report. He claimed the increases in jobs at department stores and general merchandise stores were seasonal adjustment factors.

"Both numbers are contaminated by seasonal adjustments and anything that says recovery is suspect," said Dhawan. "If department stores didn’t hire in December, and they didn’t, then they didn’t have to lay them off in January," which shows up as a monthly increase in employment, he said. "My rule of thumb is to see these numbers three months in a row to be able to say things have gelled."

Meanwhile, the apparel industry reduced its payrolls by another 3,000 seasonally adjusted jobs to employ 503,000 jobs in January. The domestic textile industry shaved off another 1,000 jobs last month to employ 421,000. Compared with January 2002, the apparel industry employed 33,000 fewer people and the textile industry had 23,000 fewer jobs.

Charles McMillion, chief economist of MBG Information Services, said, "I expect to see job loss numbers increasing fairly dramatically over the next several months as producers get rid of unused capacity."

A war with Iraq will increase consumer anxieties and could lead to further erosion in confidence, which would translate into declining sales and more layoffs, he said. McMillion also noted that hourly wages were flat in nominal terms, which means if there was any inflation in January, real wages fell.

"The overall picture will continue to be difficult for the textile and apparel industries," hesaid. "The continuing flood of imports, enormous levels of unused capacity and weakening consumer demand translates into a difficult environment and I’m not even factoring in a war."

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