Jobless Rate Spikes Up in January

W A S H I N G T O N, Feb. 2, 2001 -- The nation’s unemployment rate climbed to 4.2 percent in January, the highest level in 16 months, as the dramatic slowdown in economic growth forced thousands of layoffs in autos and other manufacturing industries.

The nation's jobless rate rose 0.2 percentage point from a 4 percent rate in December, the biggest one-month jump since April 1999, the Labor Department reported today. The unemployment rate last stood at 4.2 percent in September 1999.

Manufacturing was the hardest-hit sector, losing 65,000 jobs last month and bringing total factory losses to a quarter million since June.

Labor Secretary Elaine Chao called the unemployment outlook "troubling," saying it underscores the need for President Bush's 10-year $1.6 trillion across-the-board tax cut to help bolster economic growth.

"President Bush's tax cut will allow workers to keep more of their paychecks — helping workers, families and the economy," she said in a statement. "The President's tax cut is the answer to stimulate the economy and head off further unemployment, but it must be passed soon to have needed impact."

Strong Signs of Slowdown This huge job decline is seen as evidence that manufacturing is already in a recession. Some analysts have begun to express fears that this weakness could spread and end the nation's record-long 10-year stretch of uninterrupted growth.

In another report, orders to U.S. factories rose 1.1 percent in December. The figure reflected a big jump in demand for airplanes and other transportation equipment, masking weakness elsewhere in the report.

Excluding transportation, orders fell 0.8 percent to their lowest level since April, the Commerce Department said.

Orders were down sharply for computers, office equipment and communications products. Primary metals, including steel, posted the largest drop since October 1998. Shipments, a barometer of current production, fell by 0.2 percent, the fourth straight monthly decline.

Seeking to prevent the ailing economy from slipping into recession, the Federal Reserve this week cut interest rates by a half point, the second such reduction in the space of just three weeks. Economists expect further rate reductions to spark economic growth.

Overall economic growth slowed to an annual rate of just 1.4 percent in the fourth quarter, the weakest performance in more than five years, and Federal Reserve Chairman Alan Greenspan has estimated that growth in the current quarter could be "very close to zero."

The severity of the drop in economic activity caught the Fed by surprise, but private analysts believe the aggressive interest rate cuts with the promise of more to come should be enough to keep the country out of recession.

The unemployment rate dropped to a 30-year low of 3.9 percent during three months of last year, reflecting the strength of the red-hot economy during the first half of 2000.

The jobless rate had been at 4 percent in both November and December, but with the sharp slowdown in overall economic activity, economists are forecasting the jobless rate could rise to above 5 percent by the end of 2001.

Payrolls Grow, Hourly Earnings Unchanged Even with the sharp rise in unemployment, payroll growth posted a sizable gain of 268,000 in January, but more than half of that came from an increase of 145,000 jobs in construction. The government said this reflected a rebound after unusually harsh weather in November and December, which resulted in huge layoffs.

The overall rise in unemployment has slowed wage pressures with average hourly earnings showing no increase at all in January, remaining at $14.02 an hour. The length of the average work week, which had posted a big drop in December, rebounded slightly to 34.3 hours in January.

The loss of 65,000 jobs in manufacturing last month was the biggest decline since 116,000 in August. Manufacturing losses were widespread. The biggest decline, 38,000 jobs, was in automobiles, as manufacturers tried to trim production in the face of slumping sales.

Layoffs Not Letting Up More layoffs are on the way. DaimlerChrysler announced this week it was cutting payrolls by 26,000. That followed earlier announcements of thousands of others layoffs from some of the biggest names in U.S. industry — General Motors, AOL Time Warner and Sears — as companies struggled to cope with the weakening economy by trimming payrolls.

In one bright spot, the mining industry added 5,000 jobs in January, bringing total increases to 29,000 since August 1999 as oil and gas companies boost employment in response to the surge in energy prices.

Service industries added 81,000 jobs in January despite the fact that temporary-help firms cut employment by 39,000. This industry has trimmed 184,000 jobs since April as the cooling job market has cut demand.