Jobless Rate Jumps To 4.2 Percent In January

The nation's jobless rate rose 0.2 percentage points from a 4 percent rate in December, the biggest one-month jump since April 1999, the Labor Department reported today, Feb. 2, 2001. 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.

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.

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.

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 workweek, which had posted a big drop in December, rebounded slightly to 34.3 hours in January.

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.

The author is an Associated Press writer.