3 August 2001, 17:37 US unemployment rate still seen rising to 5 pct despite July report - analyst
WASHINGTON (AFX) - The US unemployment rate is still expected to
rise to 5 pct on the back of the sharp slowdown in the economy, despite
the apparent stability registered in July, said Robert McGee, chief
economist at Tokai Bank in New York.
The July employment report "basically shows there's not too much
significant improvement," with the decline in non-farm payrolls "close
to the average of recent months," McGee said.
He forecast the unemployment rate would rise to 5 pct "early next
year."
The Labor Department earlier reported that non-farm payrolls
dropped a lower than expected 42,000 in July, while the unemployment
rate held steady at 4.5 pct.
McGee cautioned that the private sector lost more jobs than the
headline figures would suggest, as government job creation helped to
support the labor market.
The report supports forecasts for a 25 basis point Federal Reserve
rate cut at the next scheduled policy meeting on Aug 21, he said.
McGee said that labor market indicators in general are a lagging
indicator, and pointed to other signs that a rebound in economic
activity is likely in the second half.
He noted that 40 bln usd in tax rebates currently being distributed
by the federal government are "showing early signs that the tax cut
will have a higher effect than anticipated."
In the Conference Board's most recent Consumer Confidence survey,
respondents raised their plans for consumption over the next six
months.
"This was likely the result of receiving notifications about their
tax rebates," which were mailed out in July, he explained.
Therefore, the expected further deterioration in the unemployment
rate should not be a worrying forward-looking sign, he concluded.
© 1999-2024 Forex EuroClub
All rights reserved