NEW YORK – The U.S. unemployment rate managed to stay steady at 4.9 percent — but companies shed 199,000 jobs in September, the largest job loss in more than a decade and almost double what Wall Street expected.
The Labor Department's unemployment report released Friday showed that the labor market was under intense pressure even before last month's terrorist attacks. Manufacturing companies laid off 93,000 workers last month, the 14th consecutive month of job losses at factories. Over that period, 1.1 million workers have lost their jobs.
October Report Will Be Worse
Because of the way the government gathers the employment statistics, the September report captured none of the more than 200,000 layoffs in the airline and travel industries that occurred after the Sept. 11 attacks. Those layoffs will show up in the October jobless report.
Many economists are predicting that the unemployment rate in October could surge to 5.3 percent or higher because of the widespread layoffs that have already occurred.
The September jobless rate of 4.9 percent was the same as the August level, with both months showing unemployment now at the highest rate since the country entered the year-long economic slowdown last summer. Unemployment last year had fallen to a three-decade low of 3.9 percent.
Many economists are predicting that the shock of the terrorist attack will push the country into a full-blown recession, the nation's first downturn since the 1990-91 slump, which occurred in part because of the economic disruptions from skyrocketing oil prices after Iraq invaded Kuwait.
President Bush, whose father was in the White House during the last downturn, is working with Congress to fashion an economic stimulus program of as much as $75 billion in an effort to make sure that any downturn will be mild and brief.
However, Democrats in Congress have objected that the administration wants to tilt the stimulus package too much in favor of tax cuts for the wealthy. They are seeking bigger increases in benefits for low-income workers and those who have been laid off as a result of the terrorist attacks.
Manufacturing Hardest Hit
For September, the drop of 199,000 payroll jobs was the largest one-month decline since payroll jobs fell by 259,000 in February 1991, when the country was mired in the last recession. Payrolls had fallen by 84,000 in August.
The 93,000 jobs cuts in manufacturing included big losses at factories making industrial machinery and electrical equipment, which have accouned for nearly two-fifths of the manufacturing jobs cut this year. Manufacturing has been the hardest hit part of the economy during the slowdown.
The Federal Reserve cut interest rates for a ninth time on Tuesday, a half-point cut which drove a key rate to its lowest point in nearly 40 years. Before the September terrorist attacks, many economists believed the worst of the economic slowdown was coming to an end. They were forecasting a solid rebound in the last part of this year that would keep the country out of a recession.
However, those forecasts have been marked down significantly since Sept. 11 as the nation's airlines were shut down. Even after air travel resumed, airlines reported that many planes were only half full as Americans cancelled travel planes because of fears of further terrorist hijackings.
Many economists believe that overall economic growth, which slowed to a barely discernible 0.3 percent rate in the April-June quarter, entered negative territory in the just completed July-September period. They are forecasting declines in the gross domestic product of 1 percent in both the third and fourth quarters this year.
Economists' biggest concern is that consumer spending, which accounts for two-thirds of total economic activity, will drop off sharply as Americans cut back on purchases because of their worries about losing a job and the rising uncertainty as the American military builds up for a war against terrorism.
Reuters and the Associated Press contributed to this report.