Job Losses Boost Chances For 50-Point Interest-Rate Cut

By John S. McClenahen About 2 p.m. Washington time on Tuesday, Nov. 6, Chairman Alan Greenspan and his colleagues on the Federal Open Market Committee (FOMC) will announce whether they're cutting short-term U.S. interest rates for the 10th time this year. The betting is that they will -- and that, in the wake of October's steep rise in the U.S. unemployment rate to 5.4%, there's a stronger possibility the FOMC will drop the influential federal funds rate 50 basis points to 2%. "The U.S. economy is hemorrhaging jobs," observes Bruce Steinberg, chief economist at Merrill Lynch & Co., New York. He expects sizable job losses into early 2002 and suggests the U.S. unemployment rate is headed "for at least 6.5%." In October, non-farm payrolls in the U.S. plunged by 415,000 people, a figure that Lois Orr, the acting head of the U.S. Bureau of Labor Statistics, characterizes as "an unusually large single-month drop." The impact of the Sept. 11 terrorist attacks on New York and Washington is part of the explanation. But, says Orr, the effect of the attacks "cannot be separated from other influences on the job market." Indeed, "most of the job loss [in October] resulted from the weakening of economic activity that took place after Sept. 11," claims Merrill Lynch's Steinberg. In manufacturing, the BLS data show widespread job losses continuing with factory employment falling by 142,000 in October. In fact, last month was the 15th consecutive month of U.S. factory job losses, which, since July 2000 now total 1.3 million. During October, electrical equipment, industrial machinery, and autos each shed more than 20,000 jobs.

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