(CBS) The nation's unemployment rate jumped to 6 percent in April and companies slashed jobs for the third straight month — particularly in manufacturing, airlines and retail — as the fragile economy continued to quash hiring prospects.
Last month's jobless rate was up from 5.8 percent in March, with payrolls falling by 48,000, the Labor Department reported Friday. Those figures matched economists' expectations.
The economy has lost more than half a million jobs in the past three months as the number of unemployed workers surged to 8.8 million. Nearly 2 million people have been jobless for 27 weeks or more.
The jobless rate has hovered at or near 6 percent for more than a year. The last time it was higher was in July 1994, when the rate was 6.1 percent as the country was emerging from a previous recession.
April's jobless rate increase was caused in part by 680,000 people returning to the labor force. The ouster of Saddam Hussein's regime in Iraq boosted Americans' confidence, sending many unemployed people back out to look for work. But their searches yielded little results because the economy wasn't healthy enough to create new jobs.
Even before the war, businesses were wary about making big spending and hiring commitments in a weak economy struggling toward recovery.
A big fear among economists is that consumers, whose spending accounts for two-thirds of all U.S. economic activity, will continue to keep their wallets closed as layoffs continue and hiring remains stagnant. That scenario would result in even more job losses.
Federal Reserve Chairman Alan Greenspan said Wednesday he remained hopeful that the end of the Iraq war will result in stronger economic growth in the months ahead, but he cautioned that improvement may occur only gradually.
Greenspan said he still holds to the view that he expressed in February — that the so-far lackluster recovery from the 2001 recession would accelerate to faster growth once the uncertainties associated with the Iraq war are removed.
"I continue to believe the economy is positioned to expand at a noticeably better pace than it has during the past year, though the timing and the extent of that improvement remains uncertain," Greenspan said in testimony to the House Financial Services Committee.
However, he cautioned that business remains very skittish about increasing spending or hiring, and gave no hints as to what the Fed might decide about interest rates at its meeting next week, reports CBS News Capitol Hill Correspondent Bob Fuss.
Greenspan's generally positive comments bolstered the view that it will be content to leave rates unchanged for the foreseeable future unless the economy unexpectedly weakens further.
The Fed last cut interest rates on Nov. 6, pushing its target for the federal funds rate to a 41-year low of 1.25 percent.
In his testimony, Greenspan held out the prospect for further interest rate reductions if necessary, especially if business investment, so far a no-show in the current recovery, continues to lag.
"Unfortunately, the future path of the economy is likely to come into sharper focus only gradually," Greenspan said. "In the interim, we need to remain mindful of the possibility that lingering business caution could be an impediment to improved economic performance."
Greenspan said that the underlying inflation rate, outside of energy and food costs, had remained at a very low level in recent months and signaled that the Fed was on guard to further stimulate the economy to prevent deflation — falling prices — should that become necessary.
"With price inflation already at a low level, substantial further disinflation would be an unwelcome development, especially to the extent it put pressure on profit margins and impeded the revival of business spending," he said.
On the positive side, Greenspan took note of the April rebound in consumer confidence readings, but he also pointed to the sharp jump in new unemployment claims in recent weeks as a cause for concern.
©MMIII, CBS Broadcasting Inc. All Rights Reserved.
~Did You Miss These?~
Just a Reminder - Tuesday, Nov. 04, 2003
Ravyne Is Moving - Friday, Oct. 17, 2003
The Mission - Sunday, Oct. 12, 2003
Siege Heil - Thursday, Oct. 09, 2003
Litany Of Lies - Wednesday, Oct. 08, 2003
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