U.S. unemployment jumps - highest in four years

greenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

U.S. unemployment jumps Rate hits 4.9 percent, highest in four years, as payrolls sink 113,000 September 7, 2001: 9:16 a.m. ET NEW YORK (CNNfn) - The U.S. unemployment rate jumped to the highest in four years in August, the government said Friday, as employers cut far more jobs than private economists had expected, pointing to continuing weakness in the world's largest economy.

The unemployment rate rose to 4.9 percent in August from 4.5 percent in July, while employers cut 113,000 jobs outside the farm sector, compared with a revised gain of 13,000 jobs in July, the Labor Department reported. Economists surveyed by Briefing.com expected an unemployment rate of 4.6 percent and job cuts of only 45,000.

The unemployment rate was the highest since a 4.9 percent reading in September 1997.

"The unemployment rate raises much more concern about the health of the economy," said Mike Niemira, senior economist with Bank of Tokyo Mitsubishi.

U.S. stock futures fell immediately after the report, but recovered some of those losses later in the morning. Meanwhile, U.S. Treasury bond prices rose, sending bond market yields lower, as investors bet on another cut in short-term interest rates by the Federal Reserve.

The Fed has cut its target for short-term rates seven times so far this year in a bid to keep consumers spending and keep the economic slowdown from turning into a recession. Federal Reserve Chairman Alan Greenspan and other economists worry that consumers, whose spending has helped prevent a recession, will cut back on purchases if they fear for their own jobs. Consumer spending fuels two-thirds of the nation's economy.

"What this report means is the economy is still losing jobs, and we'll probably have another Federal Reserve (interest) rate cut, and maybe more than one," said Astrid Adolfson, economist with MCM Moneywatch.

Still, the unemployment number is a lagging indicator, and many economists expected it to continue to rise even as the economy began to recover.

The beleaguered manufacturing sector lost 141,000 jobs in August, the biggest monthly drop of the year, bringing total cuts in the sector to 1 million since July 2000. The job cuts take some of the wind out of an unexpectedly positive report earlier this week on manufacturing activity from the National Association of Purchasing Management.

"That's a huge drop in manufacturing... that throws that NAPM number in a less favorable light," said James Jackson, director of fixed income at Brinson Partners.

Still, some analysts noted that the government revised its reading for July to a rise of 13,000 jobs, from a previous estimated drop of 42,000

-- PHO (owennos@bigfoot.com), September 07, 2001


Moderation questions? read the FAQ