Archive for Saturday, September 8, 2001

Jobless rate hits 4-year high

September 8, 2001


— The nation's unemployment rate swelled to 4.9 percent in August as job losses in manufacturing passed 1 million for the yearlong national slowdown. The increase in the monthly jobless rate was the biggest in six years.

The report Friday virtually guaranteed further interest rate cuts by the Federal Reserve to try to revive the economy, analysts said.

Businesses slashed 113,000 jobs from their payrolls last month, the Labor Department reported. The jobless rate rose by 0.4 percentage point from 4.5 percent in July, the level it had held since April.

"The slowdown is real and it's affecting too many lives and we're concerned about it," President Bush said at the White House after meeting with anxious Republican leaders.

The jobless report sent stocks tumbling on Wall Street. The Dow Jones industrial average closed down almost 235 points, coming within striking distance of its low for the year. The Standard & Poor's 500 index closed at its lowest level in nearly three years.

"'Ugly' is not a strong enough term to describe this report," said Joel Naroff, president and chief economist of Naroff Economic Advisors. "It was brutal."

The unemployment report tends to indicate where the economy already has been rather than where it is going. The jobless rate often continues rising even after the economy starts to improve, reflecting businesses afraid to hire back workers until they are certain the rebound is sustainable.

But economists were worried about the report's effect on consumers, whose spending has kept the economy afloat during the sluggish past year.

"When the economy needs consumers' support most, this bad news comes along," said Richard Yamarone, economic research director for Argus Research Co.

In August, manufacturing again was hardest hit, shedding 141,000 jobs for the biggest one-month loss so far this year. Virtually every major manufacturing industry lost jobs.

Since July 2000, manufacturing employment has plummeted by more than 1 million, but gains in the service sector helped offset those losses.

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