U.S.

U.S. Jobless Rate Jumps

February 2, 2001 / 8:33 AM EST / AP

The nation's unemployment rate climbed to 4.2 percent in January, the highest level in 16 months, as the dramatic slowdown in economic growth forced thousands of layoffs in autos and other manufacturing industries.

The nation's jobless rate rose 0.2 percentage point from a 4 percent rate in December, the biggest one-month jump since April 1999, the Labor Department reported Friday. The unemployment rate last stood at 4.2 percent in September 1999.

Manufacturing was the hardest-hit sector, losing 65,000 jobs last month and bringing total factory losses to a quarter million since June.

This huge job decline is seen as evidence that manufacturing is already in a recession. Some analysts have begun to express fears that this weakness could spread and end the nation's record-long 10-year stretch of uninterrupted growth.

Seeking to prevent the ailing economy from slipping into recession, the Federal Reserve this week cut interest rates by a half point, the second such reduction in the space of just three weeks. Economists expect further rate reductions to spark economic growth.

Overall economic growth slowed to an annual rate of just 1.4 percent in the fourth quarter, the weakest performance in more than five years, and Federal Reserve Chairman Alan Greenspan has estimated that growth in the current quarter could be "very close to zero."

The severity of the drop in economic activity caught the Fed by surprise, but private analysts believe the aggressive interest rate cuts with the promise of more to come should be enough to keep the country out of recession.