Unemployment rate remains stuck at 4.9 percent as businesses reduce payrolls

Friday, October 5th 2001, 12:00 am
By: News On 6

WASHINGTON (AP) _ The nation's unemployment rate remained stuck at 4.9 percent in September as American businesses shed 199,000 jobs last month, the largest job loss in more than a decade.

The Labor Department's unemployment report released Friday showed that the labor market was under intense pressure even before last month's terrorist attacks. Manufacturing companies laid off 93,000 workers last month, the 14th consecutive month of job losses at factories. Over that period, 1.1 million workers have lost their jobs.

Because of the way the government gathers the employment statistics, the September report captured none of the more than 200,000 layoffs in the airline and travel industries that occurred after the Sept. 11 attacks. Those layoffs will show up in the October jobless report.

Many economists are predicting that the unemployment rate in October could surge to 5.3 percent or higher because of the widespread layoffs that have already occurred.

``We had a weak situation going into the Sept. 11 shock and now we have that blow hitting us at a time of weakness,'' said Robert Dederick, who said he believed the country was now in a recession that would last for at least six months.

Dederick said the jobless rate was likely to go as high as 6.5 percent before a recovery begins encouraging companies to start rehiring workers next year.

The September jobless rate of 4.9 percent was the same as the August level, with both months showing unemployment now at the highest rate since the country entered the yearlong economic slowdown last summer. Unemployment last year had fallen to a three-decade low of 3.9 percent.

The unemployment rate, which is based on a survey of American households, remained unchanged in September even though a separate survey of businesses showed the sharp reduction in non-farm payroll jobs. Over time, the two surveys generally reflect the same trends.

Many economists are predicting that the shock of the terrorist attack will push the country into a full-blown recession, the nation's first downturn since the 1990-91 slump, which occurred in part because of the economic disruptions from skyrocketing oil prices after Iraq invaded Kuwait.

President Bush, whose father was in the White House during the last downturn, is working with Congress to fashion an economic stimulus program of as much as $75 billion in an effort to make sure that any downturn will be mild and brief.

However, Democrats in Congress have complained that the administration wants to tilt the stimulus package too much in favor of tax cuts for the wealthy. They are seeking bigger increases in benefits for low-income workers and those who have been laid off as a result of the terrorist attacks.

For September, the drop of 199,000 payroll jobs was the largest one-month decline since payroll jobs fell by 259,000 in February 1991, when the country was mired in the last recession. Payrolls had fall by 84,000 in August.

The 93,000 jobs cuts in manufacturing included big losses at factories making industrial machinery and electrical equipment, which have accounted for nearly two-fifths of the manufacturing jobs cut this year.

The Federal Reserve cut interest rates for a ninth time on Tuesday, a half-point cut which drove a key rate to its lowest point in nearly 40 years.

Many economists believe that overall economic growth, which slowed to a barely discernible 0.3 percent rate in the April-June quarter, entered negative territory in the just completed July-September period. They are forecasting declines in the gross domestic product of 1 percent in both the third and fourth quarters this year.

Economists' biggest concern is that consumer spending, which accounts for two-thirds of total economic activity, will drop off sharply as Americans cut back on purchases because of their worries about losing a job and the rising uncertainty as the American military builds up for a war against terrorism.

The Labor Department's monthly unemployment report is based on surveys done of households and businesses during the week that covered the Sept. 11 attacks. However, a person is counted as employed even if they only work one hour during that week. That meant that even if workers were laid off following the attacks, they would remain counted as employed in the monthly survey.

Employment in construction jobs fell by 4,000 last month. Services, where most Americans are employed, also showed a rare decline for September, with cutbacks of 41,000 jobs. The biggest decline was in business services, a category that includes temporary help agencies who have been hard hit by the slowing economy.