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 4.2percent in January, the highest level in 16 months, as the dramaticslowdown in economic growth forced thousands of layoffs in autosand other manufacturing industries.

The nation's jobless rate rose 0.2 percentage point from a 4percent rate in December, the biggest one-month jump since April1999, the Labor Department reported today. The unemployment ratelast stood at 4.2 percent in September 1999.

Manufacturing was the hardest-hit sector, losing 65,000 jobslast month and bringing total factory losses to a quarter millionsince June.

Labor Secretary Elaine Chao called the unemployment outlook"troubling," saying it underscores the need for President Bush's10-year $1.6 trillion across-the-board tax cut to help bolstereconomic growth.

"President Bush's tax cut will allow workers to keep more oftheir paychecks — helping workers, families and the economy," shesaid in a statement. "The President's tax cut is the answer tostimulate the economy and head off further unemployment, but itmust be passed soon to have needed impact."

Strong Signs of SlowdownThis huge job decline is seen as evidence that manufacturing isalready in a recession. Some analysts have begun to express fearsthat this weakness could spread and end the nation's record-long10-year stretch of uninterrupted growth.

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

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

Orders were down sharply for computers, office equipment andcommunications products. Primary metals, including steel, postedthe largest drop since October 1998. Shipments, a barometer ofcurrent production, fell by 0.2 percent, the fourth straightmonthly decline.

Seeking to prevent the ailing economy from slipping intorecession, the Federal Reserve this week cut interest rates by ahalf point, the second such reduction in the space of just threeweeks. Economists expect further rate reductions to spark economicgrowth.

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

The severity of the drop in economic activity caught the Fed bysurprise, but private analysts believe the aggressive interest ratecuts with the promise of more to come should be enough to keep thecountry out of recession.

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

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

Payrolls Grow, Hourly Earnings UnchangedEven with the sharp rise in unemployment, payroll growth posteda sizable gain of 268,000 in January, but more than half of thatcame from an increase of 145,000 jobs in construction. Thegovernment said this reflected a rebound after unusually harshweather in November and December, which resulted in huge layoffs.

The overall rise in unemployment has slowed wage pressures withaverage 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 34.3hours in January.

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

Layoffs Not Letting UpMore layoffs are on the way. DaimlerChrysler announced this weekit was cutting payrolls by 26,000. That followed earlierannouncements of thousands of others layoffs from some of thebiggest 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 inJanuary, bringing total increases to 29,000 since August 1999 asoil and gas companies boost employment in response to the surge inenergy prices.

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