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Buffalo Niagara's unemployment rate dropped in March to 5.5 percent from 5.9 percent the previous month and 6.7 percent a year earlier, the state Labor Department said Thursday.

Nevertheless, the region's total jobs fell by 2,500 from a year ago. Private sector jobs were down by 300, but the area's manufacturing sector saw a gain of 400 jobs.

John Slenker, regional economist for the state Labor Department, said any rate in the 5 percent range historically is good for Buffalo. "Obviously the lower the better, but overall the area's numbers were fairly good," he said.

However, the improvement came not because more people were working, but because fewer were looking. In all, 544,000 people were employed in the region in March, exactly the same as a year ago. (The number of people employed and the number of jobs is not the same.) But only 31,500 were considered unemployed, compared to 39,000 a year ago. The rest were no longer actively in the labor force.

That could change along with workers' perceptions of the job market. The rate of unemployment is based on the number of people actively looking for work, which might increase because of the positive news.

"It's possible that as more people see there are increasing opportunities for employment, you might see the unemployment rate spike as more people enter the labor force," said Ron Thompson, regional economist at Global Insight, a forecasting firm based in Waltham, Mass.

"That isn't bad. It's a good thing. It means that people feel there are jobs out there and people feel it's worth their while to go out and try to get them."

The state's unemployment rate dropped to its lowest level in nearly four years in March, reflecting signs of a recovery as the state added jobs in professional services, hospitality, and educational and health services, the Labor Department said.

The statewide jobless level, on a seasonally adjusted basis, fell to 4.6 percent in March, down from 5.1 percent in February and 6.1 percent a year ago. That's the lowest since June 2001, and it's the third straight month in which the state's rate was lower than the nation's, at 5.2 percent.

Total private sector jobs in the state rose by 4,900 positions, or 0.1 percent, in March, matching the national pace for the month. That's the seventh straight month the state added private sector jobs. Without the adjustment for seasonal changes, the private sector added 47,500 jobs, while total jobs rose 53,900.

"New York state continues to see signs of an improving labor market," said David J. Trzaskos, director of the Division of Research and Statistics at the state Labor Department.

All 62 counties in the state reported lower unemployment rates. New York City, as usual, was higher than the rest of the state, at 5.2 percent compared to 4.2 percent for upstate. But the city's rate matched the national level for the first time since September 1988.

"It's starting to slowly make its way out of the doldrums," Thompson said.

By contrast, Buffalo's rate was the second-highest of the metro areas, ahead of only Elmira at 6 percent. Elmira is isolated geographically, while Buffalo has its dependency on manufacturing to blame, Thompson said.

"It takes longer for them to come out of recession and longer for them to catch up with the state average," he said.

In the past month, job gains statewide were led by employment and other professional services, with 10,800 new hires; food and other hospitality services, with 10,100; and educational and health services, with 10,000.

Other hot spots included construction with 6,500, mostly in specialty trades; local government with 6,400; retail and wholesale trade with 3,400; information services, especially motion picture and sound recording, with 2,000, financial activities with 1,500 and manufacturing with 700, led by non-durable goods.

These are the unemployment rates for the eight counties of Western New York for March, February, and March 2004:

Erie -- 5.3; 5.8; 6.5.

Niagara -- 6.1; 6.6; 7.6.

Chautauqua -- 5.3; 5.8; 6.8.

Cattaraugus -- 5.7; 6.4; 7.5.

Allegany -- 6.0; 7.0; 7.5.

Genesee -- 5.6; 6.5; 7.1.

Orleans -- 7.0; 7.6; 8.4.

Wyoming -- 6.3; 7.2; 8.7.