Posted on: Saturday, August 4, 2001

Encouraging signs keep jobless rate at 4.5%

Associated Press

WASHINGTON — The nation's unemployment rate held steady at 4.5 percent in July as the yearlong hemorrhaging of manufacturing jobs slowed and service jobs posted a small gain.

The Labor Department reported yesterday that the unemployment rate was unchanged, surprising analysts who thought it would climb to 4.7 percent because of the economic slowdown.

Businesses cut payrolls for the second month in a row, eliminating 42,000 jobs in July after a loss of 93,000 in June, a smaller decline than the government previously reported.

"The economy remains weak, but hints of stabilization are emerging," said Bruce Steinberg, chief economist at Merrill Lynch.

To avert a recession, the Federal Reserve has cut interest rates six times this year, totaling 2.75 percentage points. Many analysts believe the Fed will order another rate reduction at its next meeting Aug. 21.

Some economists fear that if the employment climate seriously worsens, consumers — who have been keeping the economy afloat — might sharply cut back spending and tip the country into recession.

Manufacturing, which has been hardest hit by the economic slowdown and many think is in a recession of its own, continued its yearlong slide, losing 49,000 jobs in July. That brought the total job loss to 837,000 during the past year. But the loss in manufacturing jobs in July was less than half the size of the losses in each of the prior three months.

In the service sector, normally the engine of job creation in the United States, only 5,000 jobs were added in July, the weakest showing since August 2000. A major factor has been large job losses at temporary employment companies. Employment at those businesses declined for the 10th straight month, totaling a job loss of 429,000 during that period.