U.S. jobless rate rises in November from 30-year low

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Friday December 8, 9:25 am Eastern Time U.S. jobless rate rises off 30-year low By Caren Bohan WASHINGTON, Dec 8 (Reuters) - The number of workers on U.S. payrolls grew moderately in November as the unemployment rate rose off its 30-year low, the government said on Friday, adding to signs the once-soaring economy is cooling down. Payrolls outside the farm sector rose 94,000 after a downwardly revised 77,000 gain in October, the Labor Department said in its monthly jobs report, one of the most closely watched gauges of the U.S. economy's strength. October's increase was previously reported as 137,000. November's payroll number fell short of the expectations of U.S. economists, who had projected payrolls growth of 140,000. The jobless rate inched up to 4 percent from the previous month's 3.9 percent, which had been a three-decade low. Financial markets welcomed the report, which investors said strengthened their belief that a slowing economy may prompt the Federal Reserve to cut key interest rates next year to ensure a much-awaited slowdown does not deteriorate into a recession. Earlier this week, Fed Chairman Alan Greenspan sparked a rally in jittery U.S. financial markets by indicating he was open to reducing borrowing costs if the economy seemed in jeopardy of slowing too much. The recent subdued growth in payrolls and the move higher in the unemployment rate would seem to add to arguments for lowering interest rates in the near future. But offsetting that in the November report was a 0.4 percent jump in average hourly earnings, which had been forecast to rise by 0.3 percent. ``The bottom line is that, yes, there is a slowdown and slightly more than I would have guessed,'' said Bill Cheney, chief economist at John Hancock Financial Services in Boston. ``The fact that non-farm payrolls comes in at 94,000...indicates that it is right where Alan Greenspan wants it,'' he said. INFLATION FEARS SUBSIDE Still, inflation-sensitve U.S. Treasury bond prices dipped slightly after the report. Traders said the market had rallied so powerfully over recent days that it would have needed an exceptionally strong jump in the jobless rate to extend its gains. U.S. stock prices were expected to open higher. The red-hot job market has been one of the hallmarks of the U.S. economic expansion, which has continued uninterrupted since early 1991 -- a record. Fed policymakers and many economists had been concerned that with unemployment so low, wage pressures would mount and send inflation higher. That was one reason the Fed boosted interest rates six times between mid-1999 and May of this year. Those rate rises and sliding stock prices have since taken the wind out of the economy's sails. Newer companies in the high-technology sector of the economy have taken a huge beating in the stock market, which economists say was sure to have crimped hiring. The Fed next meets to discuss interest rates on Dec. 19 amid expectations it will leave credit costs on hold. But analysts widely expect it to discard a long-standing warning that inflation is the prime danger to the economy in favor of a more balanced statement that would highlight the economic risks of both an excessive slowdown and of inflationary overheating. Such a shift in the Fed's posture would open the door to cuts in interest rates sometime next year.

-- (today's@economic.news), December 08, 2000

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Friday December 8, 1:02 pm Eastern Time U.S. Consumer sentiment rattled in December -- U Mich (UPDATE: Recasts with background, analyst comments) By Ross Finley NEW YORK, Dec 8 (Reuters) - A leading barometer of U.S. consumer sentiment skidded in December to its lowest reading since the 1998 global financial crisis as a slowing U.S. economy and carnage in technology stocks rattled the confidence of American consumers. The University of Michigan said on Friday its consumer sentiment index, which is directly released to market subscribers twice monthly, plunged to a preliminary reading of 97.4 in December from a final 107.6 in November. That was the index's lowest level since October 1998, after Russia devalued its currency and a large U.S. hedge fund collapsed, sending shock waves through the global economy. With the exception of October 1998 and Friday's reading, the index has not fallen below 100 since March 1997. The December data follows last week's report from the New York-based Conference Board saying that consumer confidence dropped in November. The Conference Board, a private research group, said that in November, consumer confidence hit its lowest in more than a year. The University of Michigan data, which did not move the financial markets, were released after a much-anticipated government report that showed employers added fewer new jobs than expected to payrolls in November and a rise in the jobless rate to 4.0 percent, up from a 30-year low. ``People are worried about losing their jobs. Consumers now expect unemployment to rise significantly,'' said Richard Berner, chief economist at Morgan Stanley Dean Witter. Berner added that the slide in confidence came in tandem with the slide in the stock market. Since March, the Nasdaq composite index, led by sagging technology stocks, had shed nearly 45 percent of its value. Lately, a slowing economy has weighed on corporate balance sheets and caused many firms to revise earnings expectations. ``We are beginning to see layoff and bankruptcy announcements dominating the front pages of newspapers. We are seeing after- Christmas sales being put on three weeks before Christmas by retailers,'' said Christopher Low, chief U.S. economist at First Tennessee Capital Markets in New York. ``Something changed dramatically, and I think this is a reflection of consumers' awareness of that,'' Low said, referring to the University of Michigan report. The University's consumer expectations gauge also fell dramatically to 88.7 from a final reading of 101.6 in November. That was its lowest level since 87.5 in October 1998. The preliminary December current conditions index, meanwhile, fell to 110.9 from 116.9 in November. ``If you look at the flat trend in the expectations index and then it just kind of falls out of bed, that ... confirms my notion that things are slowing and the propensity to consume is going to wane a little bit,'' said Mickey Levy, chief financial economist at Banc of America Securities. A stream of economic data pointing to a weakening economy, along with comments from Fed officials, have prompted many market participants to bet the Fed may soon cut rates, perhaps as early as January, to kick-start flagging demand. ``I think the Fed will be easing in the first quarter,'' Levy said. ``There's no question that along with everything else the Fed is very aware of this drop.''

-- (today's@economic.news), December 08, 2000.


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