U.S.

U.S. Economy Still In Doldrums

By CBSNews.com staff CBSNews.com staff

May 4, 2001 / 8:56 AM EDT / CBS

The nation's unemployment rate held steady in July, but businesses shed 42,000 jobs during the month, a clear sign that the economy remains sluggish.

The July unemployment rate was 4.5 percent, matching June's level but up from 4.4 percent in May. The July figures beat Wall Street economists' forecasts that 50,000 jobs would be cut and that the unemployment rate would rise to 4.6 percent.

Still, another 49,000 manufacturing jobs were lost in July — continuing a year-long slide in this category. The report is unlikely to ease the pressure on the Federal Reserve to keep trimming interest rates to try to pep up a sluggish economy, with many analysts now saying a hoped-for pickup from a year-long slowdown could well be delayed into next year.

Click here To Check out the Pink Slip Parade

The biggest declines in manufacturing last month continued to be at electrical equipment companies, which lost 24,000 jobs, and in industrial machinery, which cut 21,000 jobs. Those two industries produce high-tech equipment.

CBS News Business Correspondent Anthony Mason reports the manufacturing sector continues to be the hardest hit in the slowdown. More than 630,000 factory jobs have been lost already this year and 40 percent of those are in the high tech sector.

David Isaac, laid off from the data storage company, EMC, has been job hunting since February.

"And they tell me 'Oh, you know we're cutting back now. We'll call you back later.'"

The good news is that the unemployment rate held last month and many economists were encouraged that July's job losses were less than half of those in June.

"So yes, I do believe we may have some very tentative evidence that things are starting to bottom out. And that would really be very, very encouraging," said Stephen Slifer, an economist for Lehman Brothers.

One of the reasons the Fed has cited for cutting interest rates is its concern about slumping investment by businesses in computers and other high-tech equipment, which was the fuel of the economic boom.

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 firms. Employment at those firms declined for the 10th month in a row, totaling a job loss of 429,000.

Job gains at bars and restaurants, which totaled 40,000 in July, were partially offset by losses at clothing, food, building materials and gardening supply stores.

On a positive note, large employment gains were posted in the health services industry, which added 25,000 jobs, and in engineering and management services, which gained 13,000 jobs last month.

Employment

CBSNews.com's online guide to help you Get a Job.

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

The deteriorating job market and slumping stock prices helped to erode consumer confidence in July after two months of consecutive gains, a private research group reported Tuesday.

Employment in construction was little changed in July following a decline the month before. Monthly job growth has averaged 11,000 so far this year compared with 18,000 per month in 2000.