US jobless rate grows

Unemployment up, but 'probably the best numbers since 11 September'

The US unemployment rate rose to 5.8% in December, up 0.2 of a percentage point from revised numbers for the previous month, official figures have shown.

This is another set of numbers that indicate we are reaching a bottom, and that is of course a very good sign

Delos Smith, economist at the Conference Board

The figure was in line with Wall Street forecasts and was interpreted by many economists as a sign that the bottom of the US economic downturn was being reached.

However, they said the figures did not provide a knockout punch for either those arguing that the recovery is well underway or those taking a more pessimistic view.

The jobless rate remains at a six-year high and has risen sharply since the summer, weakening consumer confidence.

And the US economy is widely expected to sink into recession when figures for the fourth quarter of 2001 are published later this month - after shrinking by 1% between July-September.

Stop the bleeding

Delos Smith, economist at the Conference Board research group said:
"Before you can start to have an expansion you have to stop the bleeding, and this is another set of numbers that indicate we are reaching a bottom, and that is of course a very good sign.

It's often the case in manufacturing when things start improving that they work people longer before they start hiring people back

Henry Willmore, chief US economist Barclays Capital

"It probably is the best set of (employment) numbers we have seen since the September 11 crisis.

"There are a lot of signs we are turning around, we are reaching a bottom."

Christopher Low, chief economist at FTN Financial in New York, agreed that business conditions were starting to stabilise.

Longer working week cheer

Although the headline jobless rate increased, some economists drew cheer from data showing an increase in the number of hours worked by manufacturing sector employees.

Said Henry Willmore, chief US economist at Barclays Capital in New York: "It's often the case in manufacturing when things start improving that they work people longer before they start hiring people back.

"I take a lot of encouragement from the workweek number."

Others said the US central bank, the Federal Reserve, still had work to do before it could be sure of stimulating economic recovery.

Stimulus stalls

Gary Thayer, chief economist at AG Edwards & Sons of St Louis, said the Fed should trim interest rates further if it wanted to ensure the economy started recovering sooner rather than later.

"They could cut by 25 basis points," he said.

Last year, the Fed cut interest rates 11 times, taking rates to 1.75%, in an attempt to stimulate consumer and corporate spending and lessen the depth of economic downturn.

The US Congress approved a large tax cut in the spring, but attempts to put together a further economic stimulus package to tackle the recession have stalled amid debates about who should be the main beneficiary.