Unemployment Rate Holds Steady

WASHINGTON (AP) â€” The nation's unemployment rate held steady at 4 percent in December even as hiring by American businesses slowed to the weakest pace in four months. <br><br>The Labor Department

Friday, January 5th 2001, 12:00 am

By: News On 6

WASHINGTON (AP) â€” The nation's unemployment rate held steady at 4 percent in December even as hiring by American businesses slowed to the weakest pace in four months.

The Labor Department said Friday that private payrolls rose by just 49,000 last month, the smallest increase since a gain of 17,000 in August. Manufacturing continued to suffer huge losses and the construction industry was hurt by unusually cold weather in December.

Overall employment was up by 105,000 last month, but more than half of that reflected increases in government jobs. For the last three months, payroll growth has averaged just 77,000, a sharp slowdown from gains of average gains of 187,000 jobs during the first nine months of the year.

Even with weak job growth, the 4 percent unemployment rate was better than many analysts had been expecting, given a rash of stories in recent weeks about thousands of job cuts at some of nation's biggest companies that reflected efforts to cope with a rapidly slowing economy.

Worried about the weakening economy, the Federal Reserve unexpectedly cut short-term interest rates by a half a percentage point Wednesday, the biggest rate cut in more than eight years, in an effort to stave off a recession.

President-elect Bush, holding a two-day economic summit in Austin, Texas, heard firsthand from some of America's top business executives about hold the slowdown was hurting their companies.

He told reporters that the Fed's efforts to stimulate the economy through lower interest rates would not be sufficient and Congress would need to move rapidly to pass his $1.3 trillion across-the-board tax cut.

Even with the slowdown in the last three months of the year, the unemployment rate for all of 2000 averaged 4 percent. That was the best showing since a 3.5 percent jobless rate in 1969. The 1999 rate averaged 4.2 percent.

The unemployment rate dropped to a 30-year low of 3.9 percent during three months of 2000. With the slowdown, economists are forecasting jobless rate could rise to 5 percent by the end of 2001.

The Fed, worried about tight labor markets, raised interest rates six times between June 1999 and May 2000 in an effort to slow the economy to a more sustainable pace.

However, its surprise rate cut this week indicated that Fed policy-makers now fear that they may have overdone the credit tightening and instead of guiding the economy to a soft landing, the economy could actually topple into its first recession since 1990-91.

One of the reasons the Fed gave for its rate reduction was the absence of inflationary pressures. That view was supported in Friday's report. Average hourly earnings, a key gauge of inflation, moderated in December, rising 0.4 percent to $14.01 an hour, slower than the 0.6 percent gain in November.

The slowing economy has contributed to some business closings and worker layoffs in certain industries.

In December, manufacturers, which have taken the brunt of slowdown, lost another 62,000 jobs, bringing their job losses for the year to 180,000. Since hitting a high in April 1998, manufacturing has shed 580,000 jobs, reflecting in part increased foreign competition as America's trade deficit soared to record highs.

Not only are factories laying off workers, they also are cutting the hours of those still employed. The factory workweek fell by 0.8 hours in December, the biggest drop since January 1996.

Construction lost 13,000 jobs in December, its second consecutive monthly decline, reflecting extreme weather conditions in both November and December.

Economic news has been dominated in recent weeks by large layoffs in some of the nation's biggest retailers. Sears, Roebuck and Co. announced Thursday it will close 89 stores and cut 2,400 people. Montgomery Ward & Co. has said it will close all its 250 stores.

In December retailers added just 8,000 jobs, pushing the total of all of 2000 to 302,000, the smallest increase since 1997.

The government, however, added 56,000 jobs in December as both state and local government showed gains during the month. For the entire year, government employment grew by 160,000 â€” just half the gain of 1999.

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On the Net:

The employment report: http://stats.bls.gov/newsrels.htm