Archive for Saturday, November 2, 2002

Economy backtracks in October

Unemployment climbs, spending sluggish, government reports

November 2, 2002


— The nation's unemployment rate climbed to 5.7 percent in October as businesses slashed payrolls for a second straight month, raising new concerns about the durability of the nation's economic recovery.

Other reports Friday also showed weakness in everything from consumer spending to manufacturing. "It could be a rather blue Christmas," said David Wyss, chief economist at Standard & Poor's.

Last month's jobless rate increased from 5.6 percent in September, and businesses cut 5,000 jobs after shedding a revised 13,000 the previous month, the Labor Department reported. The payroll cuts broke a four-month string of job gains earlier this year that had revived economists' hopes that businesses were posting "help wanted" signs once again.

"There simply are no jobs being created in this economy and until business confidence returns, it will remain a jobless recovery," said Joel Naroff, president and chief economist at Naroff Economic Advisors.

Heavy job losses in manufacturing, construction and at temporary employment firms were offset somewhat by gains in mortgage banking, finance, insurance and real estate. Those gains reflect the robust home sales and high levels of refinancing being spurred by low interest rates.

The economic recovery has proceeded in fits and starts because businesses have remained reluctant to make big commitments in hiring and spending during uncertainties about a possible war with Iraq, a turbulent stock market and shaken consumer confidence.

Another report Friday showed that consumer spending, which accounts for two-thirds of the country's economic activity, fell in September by the largest margin in 10 months. Sharp reductions in spending on big-ticket items such as cars led the decline, the Commerce Department said. Incomes also grew at a slower pace than analysts had expected.

"We are clearly hitting a soft spot with consumers worried about just about everything in the world from Iraq to terrorists," Wyss said. "I am not sure they are going to bounce out of this."

Activity at the nation's factories also fell in October.

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