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News > Economy
U.S. unemployment up
April 6, 2001: 11:02 a.m. ET

Economy loses 86,000 jobs in March; jobless rate at 20-month high of 4.3%
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NEW YORK (CNNfn) - The U.S. unemployment rate rose to its highest level in 20 months in March as businesses cut payrolls by the biggest amount in almost a decade, the government said Friday, the latest signs of a slowdown in the world's largest economy.

Several economists said the report could prompt the Federal Reserve to cut interest rates between regular meetings, possibly as early as next week.

"I think this report will lead the Fed to be much more aggressive than we would have expected a month ago," Bill Cheney, chief economist at John Hancock Financial Services Inc., said in a note Friday. "An inter-meeting cut seems far more likely now, and a cut at the May (policy makers) meeting seems all but certain."

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Businesses cut 86,000 jobs outside the farm sector last month after adding a revised 140,000 jobs in February, the Labor Department said. The unemployment rate edged up to 4.3 percent from 4.2 percent in February. The rate hasn't been that high since July 1999.

The reduction in payrolls was the sharpest since a drop of 94,000 jobs in November 1991, not long after the last recession ended and while doubts still lingered that the downturn was over.

Wall Street analysts had expected the economy to create about 70,000 jobs last month. Average hourly wages -- a key gauge of inflation rose 6 cents to $14.17, a shade above Wall Street forecasts.

The government said 135.8 million people were employed in March, compared with 141.9 million in February. The weakness in March was widespread, with losses at bars and restaurants, department stores, car dealers and temporary employment services. But manufacturers continued to be the hardest hit.

Companies have been trimming jobs by the thousands in recent months as the economic slowdown has dampened customer demand, stranding companies with extra inventory. That has forced companies across most sectors to cut back on production and trim costs.

U.S. Labor Secretary Elaine Chao said the numbers concerned her. "I think there's a lot of concern about these new numbers. The economy is kind of like the Pillsbury Doughboy at this point -- it continues to soften," Chao told CNNfn's Market Call Friday.

The report comes little more than two weeks after the Fed, the nation's central bank, cut short-term rates aggressively for the third time this year in a bid to keep the United States from slipping into recession. The next scheduled meeting of Fed policy makers is May 15. But one of its three rate cuts this year was between meetings and the central bank has served notice that it is closely monitoring the economy.

Bond prices rose but stocks fell after the report. The Dow Jones industrial average fell 130 points to 9,788 at mid-session while the Nasdaq composite index sank 2.8 percent.

graphic"I think these numbers have the potential to drive the Fed to do an inter-meeting cut," Anthony Chan, chief investment strategist with Banc One Investment Advisors, told CNNfn's Before Hours Friday. "The economy is slowing down, and I think we'll see more of this before it's over."

But Chan noted the Fed likely will look at other reports, on consumer confidence, prices and retail sales, before making any decisions on a move between meetings. He said the increased unemployment rate coupled with a slight rise in average hourly earnings doesn't indicate that the economy is in a recession.

"The unemployment rate is picking up, but it's picking up at a very slow pace," Chan said.

In its report, the department said manufacturing lost a whopping 81,000 jobs last month, with cuts affecting a wide range of industries, from auto manufacturing to industrial machinery production. Since last June, lost factory jobs totaled 451,000.

Many analysts believe manufacturing already is in a recession and some worry the weakness is spreading and will end the nation's record-long stretch of uninterrupted growth, which started its 11th year in March.

The service sector, which has been an engine of growth for the economy, lost 19,000 jobs. Temporary help firms lost 83,000 jobs.

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Economic growth slowed to an annual rate of just 1 percent in the fourth quarter, the weakest performance in more than five years. Many analysts believe the economy continued to lose altitude in the recently ended first quarter, and a few believe it actually stalled or slipped into reverse.

The report comes a day after a private report showed U.S. companies trimmed more than 160,000 jobs in March, capping a four-month period in which half a million jobs were cut.

-- from staff and wire reports graphic





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