Jobless Numbers Increase Odds Of Another Fed Cut

By John S. McClenahen As a result of August's sharp rise in the U.S. unemployment rate to 4.9%, Chairman Alan Greenspan and his Federal Open Market Committee colleagues are even more likely to lower short-term U.S. rates by another 25 basis points when they meet on Oct. 2. If they make the move, the influential federal funds rate would fall to 3.25% from its current 3.5%. Bruce Steinberg, Merrill Lynch & Co.'s chief economist, is forecasting a 25-basis-point cut. However, he's not ruling out a larger reduction. What's more, he says the odds for additional interest-rate cuts after Oct. 2 have now gone up. U.S. manufacturing lost another 141,000 jobs in August, bringing the total loss since July 2000 to just over 1 million jobs, notes Katherine G. Abraham, commissioner of the U.S. Labor Dept.'s Bureau of Labor Statistics. Manufacturing unemployment is now at 5.7%, more than two percentage points higher than August 2000's 3.5% rate. Industrial machinery, with 25,000 more jobs gone, and electrical equipment, with a loss of 19,000 additional jobs, were again the major manufacturing employment losers in August. Total U.S. manufacturing employment is now down to about 17.5 million people, figures David Huether, chief economist at the National Assn. of Manufacturers, Washington. And August's 44,000 job loss in industrial machinery and electrical equipment "indicates that there has been little rebound in investment demand either in the domestic economy or overseas," he says. "This gives further evidence that a turnaround in manufacturing, that I still anticipate in the fourth quarter, will be very gradual."

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