US jobless figures start to climb

Economic data point to an ever-slowing US economy. Friday's employment report painted a mixed picture.

The US unemployment rate has revealed a rise in January to 4.2%, partly in response to large-scale layoffs by major American corporations.

Despite the rise in unemployment, the US economy created 268,000 jobs - far exceeding analyst estimates of 80,000.

The strong labour data are but another in a string of seemingly contradictory reports from Washington. Generally, the data have shown the US economy lurching toward a recession.

Stock traders initially greeted the rapid rise in job creation with pessimism. However, closer inspection of the numbers revealed that December's data had been radically revised downward, which may account for the surge in January.

Good news, bad news?

While some analysts greeted the report with trepidation, calling the report "worrisome", at least one analyst saw positive news in the report.

"It's the most encouraging report on employment statistics in over a month," said Richard Yamarone, director of economic research at Argus Research.

The report is very telling of the US economy, he said, showing a drop in the manufacturing sector, with a loss of 65,000 jobs. Construction job soared, however. "Construction is cleary on fire," Yamarone noted.

In its report, the government said more than half - 145,000 jobs - were created within the volatile construction sector. Building projects accelerated in the US despite some of the coldest weather on record during November and December, Yamarone noted.

US jobs lost

DaimlerChrysler: 26,000

Lucent Technologies: 16,000

Sara Lee: 7,000

J C Penney: 5,300

Xerox: 4,000

The report also noted difficulty in accounting for seasonal employment, which often occurs in December and may explain the steep downward revision in new jobs during that month.

The Labor Department report also said wages were flat during the first month of 2000, and the average hourly work week climbed 0.2 hours to 34.3.

Economic slowdown

While the new data suggest strong demand for workers, other figures published during the past month have been suggesting that the country is lurching toward a recession.

But economists, along with central bank chairman Alan Greenspan, have said it is too soon to predict whether the US is headed for a substantial downturn

On Thursday, a report showed a further contraction in the US manufacturing sector, suggesting that the 117-month-long US economic expansion had ended.

The National Association of Purchasing Managers (NAPM), an industry trade group, said manufacturing slowed again in the first month of 2001, with its index slipping to 41.2% in January from December's 44.3%.

A reading below 50 indicates contraction within the manufacturing sector. But a reading as low as the one released on Thursday suggests overall slowing in the nation's economy and a recession.

Wednesday showed that the nation's gross domestic product had slowed more than expected to an annual rate of 1.4% during last three months of 2000.

While earlier in the week a report that consumer confidence slipped to its lowest level since 1996 lent further proof of a slowing US economy.

Rate cuts to boost economy

In response to the wave of negative data, the US central bank on Wednesday dropped its key interest rate by half a point to 5.5%, in the hopes of stimulating consumer demand, following a similar drop 3 January.

Due later Friday is December's factory orders, a measure of inventories and sales at the manufacturing level.