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EDITIONS
Saturday, 8 September, 2001, 03:39 GMT 04:39 UK
Bush concern over US jobless rate
Workers at Dell Computers
A slump in manufacturing led to the rise in joblessness
US President George W Bush says he is deeply concerned by news that unemployment in the United States has reached a four-year high.


This is not good for consumer confidence and will be discouraging for everyone except perhaps the bond market

Carl Tannenbaum, chief economist, LaSalle Bank, Chicago
He urged Congress to push through what he called a pro-growth agenda to counter the slowdown, which would include congressional approval of his energy plan.

All the major US stock indexes closed down sharply after the US Department of Labor said unemployment had risen to 4.9% in August after companies cut 113,000 workers from their payrolls in the month.

The Dow Jones, an index measuring the stock value of America's biggest corporations, closed down 2.4%. Shares in London and Frankfurt also closed at three-year lows.

Mr Bush said: "The slowdown is real and is affecting too many lives. I want the American people to know we're deeply concerned about the unemployment rates and we intend to do something about it."

Democrats said the figures were evidence of economic mismanagement by Mr Bush's administration.

The figures surprised economists, almost all of whom had been expecting only a marginal rise from July's 4.5%.

The jobless rate was the highest seen in the United States since September 1997 and raises the prospect of another emergency cut in interest rates in an attempt to keep the country out of recession.

Manufacturing decline

The Labor Department attributed the job losses to cuts in the high-tech sector as well as manufacturing. More than one million jobs have now been lost in US manufacturing since last year.

"We thought it was going to be bad, it was worse," David Wyss, chief economist at Standard and Poor's, told the BBC's World Business Report.

"The continued weakness in manufacturing is our basic problem, manufacturing was all of the decline... the rest of the economy continues to show some growth, the manufacturing sector is in a dreadful slump, it shows no sign of coming out of it," he added.

The fear now is that this could discourage consumer spending.

"We see a reflection that the corporate layoffs that have been announced are now working their way into the Labor Department data," said Carl Tannenbaum, chief economist at LaSalle Bank in Chicago.

"This is not good for consumer confidence and will be discouraging for everyone except perhaps the bond market," he said.

The Federal Reserve, the US central bank, has already cut interest rates seven times this year, taking rates to 3.5% from 6.5%.

"These [jobless] numbers suggest the Fed is likely to ease rates [again]," said Mr Thayer.

Autumn recovery?

High Frequency Economics' Carl Weinberg still believes the economy is on track for recovery later this year, stressing that the jobs figures are a lagging indicator.

"These numbers reflect economic activity as it was two and three and four months ago," he said.

"The fall and early winter will bring clear evidence of a recovery that we believe is starting to shape up right now althought it is not in the figures yet."

The US Government's Bureau of Labor says there may be unusual seasonal factors at play in the figures.

"We don't really have a complete picture of what is going on in this one month. We do see a large contribution from youth aged 16 to 24 in increasing the unemployment numbers," the Bureau of Labor's Karen Kasanovich told the BBC's World Business Report.

"There is question as to whether what we are seeing here is an unusual seasonal development, perhaps the early departure of young persons from the labour force, earlier enrolment or beginning dates for school," she said.

 WATCH/LISTEN
 ON THIS STORY
David Wyss, Standard and Poor's
"The manufacturing sector is in a dreadful slump"
Karen Kasanovich, Bureau of Labor
"There is a large contribution of youth"
Carl Weinberg, High Frequency Economics
"The fall...will bring clear evidence of a recovery"
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FTSE delayed by 15 mins, Dow and Nasdaq by 20 mins

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See also:

07 Sep 01 | Business
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