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U.S. job cuts soar
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October 5, 2001: 1:44 p.m. ET
Unemployment rate steady, but data don't reflect all of Sept. 11 impact
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NEW YORK (CNNfn) - Job cuts in the United States hit a ten-year high last month, but the unemployment rate held steady, the government said Friday in a report that barely reflected the impact of last month's terrorist attacks.
The unemployment rate remained at 4.9 percent, the same as in August, but employers cut 199,000 jobs outside the farm sector compared with a revised loss of 84,000 jobs in August, the Labor Department reported. Economists surveyed by Briefing.com expected an unemployment rate of 5.0 percent and only 100,000 job cuts.
It was the largest number of job cuts since 259,000 in February 1991, when the United States was fighting the Gulf War and its economy was in a recession. The unemployment rate was steady despite the huge number of job cuts, in part because the work force -- the number of people employed or looking for work -- grew by 840,000 people in September.
Although some research for the jobs report took place after Sept. 11, the Labor Department said it probably doesn't reflect the full impact of the terrorist attacks that led several companies, especially those in the airline industry, to cut thousands of jobs. The department said those effects are expected to show up in the October report, due in a month.
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"October job loss could easily be worse," Merrill Lynch chief economist Bruce Steinberg said. "The unemployment rate is headed for 6 percent, in our view."
Other economists are not so pessimistic, but many expect unemployment to rise well above 5.0 percent in coming months, and it's certain the number of job cuts will continue to swell.
New weekly claims for unemployment benefits hit their highest level in nine years Thursday, and the closely watched Challenger Gray & Christmas report showed businesses announced about 250,000 job cuts in September -- 200,000 of which were made after the attacks.
"The attacks on Sept. 11 really sent a shock wave through our economy, and the full reverberation of that is not yet known," Labor Secretary Elaine Chao told CNNfn's Market Call program.
U.S. stock prices fell in midday trading, driven by a warning from technology bellwether Sun Microsystems (SUNW: down $0.23 to $9.06, Research, Estimates). U.S. Treasury bond prices also fell.
The Federal Reserve has cut interest rates nine times so far this year – twice since the Sept. 11 attacks – in an effort to encourage consumer spending, which fuels two-thirds of the economy.
Most economists think the attacks will tip the United States into a recession, if it wasn't there already.
"We think the economy is in recession, and it looks like October is going to be weaker than September," said Joe Lavorgna, senior U.S. economist at Deutsche Banc Alex. Brown.
President Bush said Wednesday he is seeking as much as $75 billion from Congress to help boost the economy, on top of the $40 billion in emergency spending and $15 billion bailout of the airline industry already passed by Congress.
Bush also has proposed extending the 26-week period for unemployment benefits by an additional 13 weeks and called for block grants to states to provide health-care coverage and job training to out-of-work residents.
Click here for more on the Fed and rates
"A 199,000 decline in payrolls ... really adds to the sense that it's going to take quite a bit of monetary and fiscal stimulus to turn the economy around," said Dana Johnson, head of research at Banc One Capital Markets.
With so much stimulus in the pipeline and a tenth interest-rate cut likely by the end of the year, most economists expect a rebound by some time in 2002.
But job cuts are a lagging indicator of economic health and often continue even during the first phases of a recovery.
The manufacturing sector, which has borne the brunt of a prolonged economic slowdown and has been in recession for more than a year, lost 93,000 jobs, bringing its total for the year to a staggering 900,000.
Services, where most Americans are employed, also showed a rare decline for September, losing 41,000 jobs. The biggest decline was in business services, a category that includes temporary help agencies, which have been hard hit by the slowing economy.
The Labor Department also reported that average hourly earnings rose 0.2 percent, or 3 cents, to $14.44 in September. Economists surveyed by Breifing.com expected earnings to rise by 0.3 percent, or more than 4 cents. 
-- from staff and wire reports
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