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Unemployment { May 3 2002 } Original Source Link: (May no longer be active)
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Unemployment Rate Highest in 7 1/2 Years
Last Updated: May 03, 2002 09:57 AM ET
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By Glenn Somerville
WASHINGTON (Reuters) - The U.S. unemployment rate shot up to its highest level in more than 7-1/2 years in April, the government said on Friday, bolstering a belief that it may be some months before the Federal Reserve needs to raise interest rates.
The Labor Department said 43,000 jobs were created in April but that followed a sharply revised loss of 21,000 jobs in March. The unemployment rate climbed to 6 percent in April -- its highest since a matching 6 percent in August 1994 -- from 5.7 percent in March.
Analysts said the report implied the economy still was having difficulty getting traction for sustained growth after last year's downturn. While expansion in gross domestic product -- the broadest measure of economic activity -- roared ahead during the first quarter, there have been indications that factory orders were growing only slowly.
"The higher-than-expected unemployment rate does confirm the fact that we've got a sort of stalling going on in the recovery and is also consistent with the fact that labor always lags in a recovery as well," said Sharon Stark, chief fixed income strategist at Legg Mason in Baltimore.
"Clearly, I think even August might be a stretch now for a rate hike," she added.
REVISIONS ARE BLEAK
Wall Street economists had forecast that 41,000 jobs would be created in April and that the unemployment rate would edge up to 5.8 percent.
But revised government figures show jobs were lost in each of the first three months this year -- 109,000 in January, 4,000 in February and 21,000 in March -- in a suggestion that a pickup in the labor market may lag other improving economic sectors for some time.
The Fed's policysetting Federal Open Market Committee is expected to take soft job markets into consideration when it meets to consider interest-rate strategy next Tuesday, and to decide to keep rates steady at current 40-year lows until there are firmer indications of a sustained economic recovery.
Bond prices initially jumped on the jobs report, taking it as confirmation that steady rates lay ahead for some time, but gave up some of the gains later. The dollar's value slipped as traders once again weighed prospects that a U.S. recovery may not be as robust as the first-quarter GDP figures had implied.
Stocks opened slightly softer on the weak data.
Robert Macintosh, an economist with Eaton Vance Management Inc. in Boston, said the April jobs number was weak and meant U.S. central bank policymakers should be on hold at next week's FOMC gathering and perhaps much longer.
"The Fed should do nothing. I don't think there is any impetus for the Federal Reserve to raise rates now," Macintosh said. "The economy right now is just barely moving forward, and that's not an environment for the Fed to raise rates. I don't expect rates to rise this year."
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