Monday, January 7, 2008

Unemployment Rises

Unemployment rose to 5% in December, according to the Bureau of Labor Statistics, up from 4.7% a month earlier. Unemployment was expected to grow a modest 0.1% to 4.8%. A significant jump in unemployment like this one may indicate that a recession is coming. A year earlier, the jobless rate was 4.4%. The losses were mainly in construction, retail trade, financial activities and manufacturing, while health care, mining, management and technical consulting services added jobs. It is widely believed that actual unemployment is significantly higher than official statistics would suggest, because the data may be distorted by various adjustments. Unemployment rates for some months in 2007 were revised upwards.

It is believed that weak employment data may pressure the Fed to cut rates at its next meeting on January 30. According to analysts, a half-point rate cut could help the economy avoid a recession, but concerns about the high price of oil and surging inflation remain.

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