2 November 2001, 17:39 Jobless Jump Is Biggest in 21 Years
WASHINGTON (AP) - The nation's unemployment rate soared to 5.4
percent in October, the biggest one-month jump in more than 21
years, providing the most dramatic evidence yet that economic
fallout from the terror attacks probably pushed the country into
recession. A massive 415,000 jobs were eliminated during the month.
Widespread job losses catapulted the unemployment rate from 4.9
percent in September to 5.4 percent last month, marking the highest
unemployment rate the country has seen since December 1996, the
Labor Department reported Friday.
The 415,000 jobs eliminated during the month represented the
biggest cut in payrolls since May 1980. Manufacturing, airlines,
travel agencies, hotels, retailers were among those posting big
losses.
"Companies are in survival mode and they are cutting jobs to
control costs," said economist Ken Mayland of ClearView Economics.
"The tragic events of Sept. 11 and their aftermath probably tipped
the economy into recession. People are waiting for the other shoe
to drop."
The 0.5 percentage-point advance in October's unemployment rate
also was the biggest one-month gain since May 1980.
Economists fear that continued fallout from the attacks, new
worries about anthrax in the mail, plunging consumer confidence and
rising unemployment in the months ahead, will keep consumers
tightfisted, further weakening the economy.
The economy shrank at a rate of 0.4 percent in the
July-September quarter and economists are forecasting an even
bigger drop in the current October-December quarter. A common
definition of a recession is two consecutive quarters of declining
economic output.
To revive the economy, the Federal Reserve has cut interest
rates nine times this year, with two reductions coming after the
Sept. 11 attacks. Most economists predict another rate cut at the
Fed's next meeting on Nov. 6. Some economists believe Friday's
report significantly raised the odds of a bold half-point rate
reduction, versus a more conservative quarter-point cut.
President Bush, meanwhile, wants Congress to quickly pass a
package aimed at stimulating the economy through new tax cuts and
increased government spending.
Economists are hopeful the Fed's credit easing and the expected
adoption of a stimulus package would prevent any downturn from
being drawn out and would set the stage for a rebound next year.
For the third month in a row, total payrolls declined. The loss
of 415,000 jobs in October had been preceded by cuts of 213,000 in
September and 54,000 in August.
Total employment - private companies and government - has fallen
by nearly 900,000 since March. Over the same period, employment in
the private sector alone dropped by an even bigger 1.2 million.
The carnage represents the toll of the more than yearlong
economic slump the country has been suffering through as well as
the attacks on the World Trade Center and the Pentagon.
Those attacks temporarily shut down the airlines and the stock
market and disrupted business nationwide, resulting in billions of
dollars of losses.
Manufacturing has been hardest hit by the economic slump and has
been enduring a recession of its own for months. The sector
continued to post heavy job losses. In October, another 142,000
jobs were cut, bringing total job losses since March to more than
800,000.
To cope with sagging sales, manufacturers have sharply cut back
production and shed workers.
In the airline industry, employment fell by 42,000 and in the
travel sector 11,000 jobs were cut in October. The government said
these job losses reflected fallout from the attacks.
In the service sector, normally the engine of job growth in the
country, employment dropped by 111,000 in October, the fourth and
largest decline this year for the industry. Particularly large job
losses occurred at hotels and temporary help firms.
Retailers lost 81,000 jobs in October, the second large job loss
in a row. Retailers, including clothing, toy and gift shops, that
normally hire in October for the holiday season failed to add jobs
at their normal pace, the government said.
Construction companies cut 30,000 jobs in October as builders
showed more caution in the wake of the attacks.
The jobs report caps a week of dismal economic news. After
Wednesday's GDP report showing the economy contracted in the third
quarter, the government reported Thursday that consumers cut back
on their spending in September by the largest amount in nearly 15
years. The National Association of Purchasing Management on the
same day said manufacturing activity had sank to its lowest level
since February 1991.
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