PAUL DAVENPORT
Associated Press Writer

PHOENIX (AP) - Arizona’s seasonally adjusted unemployment rate fell to 4 percent in February, but the rosy numbers are somewhat misleading and state officials said there are continuing signs that the economic slowdown is deepening.

The three-tenths of a percent decline from January is partly due to discouraged job seekers dropping out of the work force, state officials said. Meanwhile, seasonal upticks in government and hospitality sectors fell below expectations.

The Department of Commerce report released Thursday says Arizona gained a less-than-expected 25,300 nonfarm jobs. That’s well below the seasonally expected 10-year average February job gain of 33,900.

The state’s employment now stands at 2.7 million, a decline of 11,700 from January.

The monthly report said 1,900 construction jobs were lost, the highest number for February since state officials began using the current classification system in approximately 1990.

The largest single month’s loss of construction was 8,700 in January 2007.

Arizona’s construction industry has shed about 40,000 jobs in the past two years, with employment down to 203,900 last month.

``This is a housing-led downturn,’’ said Dennis Doby, senior director of the Commerce Department’s Research Administration.

The slowing economy has had a heavy impact on both state and local governments, with municipalities eliminating numerous jobs to help stay in the black in the face of reduced sales tax collections.

State policymakers have been negotiating ways to plug a projected $1.2 billion shortfall in the current $10.6 billion budget.

Money coming into government coffers continues to drop as consumers cut spending amid the construction industry slump, with legislative budget aides this week saying collections dropped 16.1 percent in January from the same month a year earlier. That was the largest monthly drop since January 2002.

The drop in construction jobs has hit both large and small contractors.

Chad Coons, president and general manager of Mesa-based R&K Building Supplies, said his company cut more than 100 jobs as construction orders started to fall.

``No question, that this is as hard of times as we’ve seen in 15-20 years,’’ Coons said in a recent interview. ``It’s going through a cycle, and it will play itself out and it will come back. There will be better times again.’’

Coons said that the work force at R&K, which supplies lumber, doors, trusses, windows and insulation primarily to the residential tract homes, peaked at about 280 people.

``The economy’s kind of shaving that off,’’ he said. ``We’re down to about 155 right now.’’

The trade, transportation and utilities sector also recorded a big loss with 3,300 fewer jobs.

Sectors showing big gains include government (14,600 jobs), professional and business services (4,700 jobs) and leisure and hospitality (5,800 jobs).