Unemployment rate rises slightly to 5.7 percent in October as business cut jobs for second month

<br>WASHINGTON (AP) _ The nation's unemployment rate edged back up to 5.7 percent in October, indicating the employment market remains shaky, and consumer spending in the previous month fell by the

Friday, November 1st 2002, 12:00 am

By: News On 6

WASHINGTON (AP) _ The nation's unemployment rate edged back up to 5.7 percent in October, indicating the employment market remains shaky, and consumer spending in the previous month fell by the largest margin in 10 months.

October's 5.7 percent jobless rate was up slightly from 5.6 percent in September, and businesses cut 5,000 jobs. It was the second month in a row of payroll cuts, the Labor Department reported Friday. Cuts came largely in manufacturing, construction and temporary employment services. Those job losses were largely offset by gains in the service sector.

At a campaign rally in Harrisburg, Pa, President Bush described the economy as ``kind of bumping along.''

``Today it looks like more Americans are looking for work, and that's a problem. We need to fix it,'' he said. ``Anytime somebody's looking for work and can't find it, it means we've got a problem. We want our people to be able to put food on the table and support their families.''

Wall Street responded predictably to the dour reports. The Dow Jones industrial average was down almost 46 points in early trading. The Nasdaq composite index fell 11 points.

The good news is the country's employment situation appears to be moderating, with the jobless rate nudging up and down slightly in recent months instead of surging in one direction. But economists are concerned about the lack of new jobs being created.

``Essentially this is a jobless recovery,'' said Joel Naroff of Naroff Economic Advisors in Pennsylvania. ``Unfortunately businesses have every good reason to be conservative right now. Why go out on a limb?''

Also encouraging was a Commerce Department report showing that construction spending jumped by 0.6 percent in September, the biggest increase since February.

That reflected stronger spending by private builders on single-family homes _ where hearty demand is being fueled by low mortgage rates _ and by the government on big projects, including military facilities, hospitals, schools and roads.

Those gains more than compensated for losses in the sagging commercial construction market, which includes offices, industrial complexes and hotels, areas still feeling the lingering effects of last year's recession and fallout from the terrorist attacks.

Business and consumer confidence is fading, shaken by a turbulent stock market and a possible war with Iraq. That has caused any recovery to continue in fits and starts as businesses have remained hesitant to increase spending to modernize and expand production in the face of weak demand.

Another report Friday showed that consumers cut back on their spending by 0.4 percent in September.

Sharply reduced spending on big-ticket items such as cars led the decline, according to the Commerce Department. Also, Americans' income, which includes wages, interest and government benefits, grew by 0.4 percent in September, on top of a 0.3 percent advance in August, it was reported.

The economy's struggles likely will be weighing on Americans' minds as they head to the polls Tuesday. Democrats and Republicans are blaming each other for the economic woes and job losses in their campaigns to win control of Congress.

Bush said ``the foundation for growth is strong. We got a problem if people can't find jobs.''

In the jobs report, the nation's factories continued shedding jobs last month, cutting 49,000 positions. The pace of job losses has increased, averaging 47,000 a month since July, compared with 20,000 a month from April to July. Construction companies cut 27,000 jobs in October, reflecting losses among special trade contractors. Temporary employment firms lost 56,000 jobs in October, possibly reflecting the weakness in manufacturing.

Employment gains in services helped moderate some of those cuts. Mortgage banking added 17,000 positions, bringing the total new jobs created to almost 100,000 since the beginning of 2001. That reflects robust home sales and high levels of refinancing spurred by low interest rates. Finance, insurance and real estate companies added 34,000 jobs in October.

The federal government also added workers for the fifth month in a row, as officials work to strengthen airline security and continue hiring people for the Transportation Security Administration.

Federal Reserve policy-makers meet again Wednesday, and some economists are looking for another rate cut in response to concerns that economic growth could slow dramatically in the final three months of this year. The Fed has kept a key interest rate at a 40-year low of 1.75 percent since last December.

Economists fear that continued job losses will crimp consumer spending, which has been the driving force for the recovery as Americans have responded to the lowest interest rates in four decades to push sales of autos and homes to record levels.

A rate cut probably won't get businesses to add jobs, but it could improve the country's mood, economists said.

``If they cut rates it will be to change psychology more than anything else,'' Naroff said.

The U.S. economy, powered by strong auto sales, rebounded to a 3.1 percent annual growth rate in the summer as business investment, which had been the major no-show in the current recovery, turned up for the first time in two years.

Most private economists believe the country will avoid a ``double dip'' recession, but they are forecasting much slower growth for this October-December quarter and the first three months of next year as consumer demand wanes under the impact of rising joblessness, the ailing stock market and worries about a possible war with Iraq.