Jobless Rate Rise To 5% Foreseen

By John S. McClenahen Although June's jobless rate rise to 4.5% was one-tenth of a percentage point less than generally expected, the prospects are for a steady increase in the closely watched unemployment figure for the rest of the year. Indeed, Gerald D. Cohen, senior economist at Merrill Lynch & Co., New York, expects the jobless rate to rise "to about 5%" before yearend. U.S. employment fell by 114,000 jobs in June -- twice the rate of consensus expectations, notes Maury Harris, chief U.S. economist at UBS Warburg LLC, New York. "The continued contraction in jobs -- and at a gradually quickening rate -- failed to signal a revival in [economic] output and should keep the Fed disposed toward additional [monetary] ease," he says. He expects the Federal Open Market Committee to reduce the influential federal funds rate by 25 basis points to 3.5% at its Aug. 21 meeting.

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