Unemployment Jumps to 6%
As Manufacturers Slash Jobs

WASHINGTON -- The jobless rate jumped to 6% in November as employers unexpectedly trimmed their payrolls. The job cuts were steepest among manufacturers and retailers, and dashed hopes that the ailing labor market had stabilized.

The report Friday from the Labor Department was a bleak snapshot of the labor market at a time when many economists believed that the worst was over for job seekers. Economists were expecting a rate of 5.8%, only a slight increase from the 5.7% recorded in October, according to a survey by Dow Jones Newswires and CNBC.

November's level of unemployment matched the rate in April, which was the highest since July 1994.

Nonfarm business payrolls declined by 40,000 last month after a 6,000 gain in October. Economists had expected payrolls to rise by 35,000.

"The labor market remains weak," said Paul Kasriel, chief domestic economist at The Northern Trust Co. in Chicago. "Unfortunately I don't see much on the horizon that's going to strengthen it."

The disappointing employment report came amid news of a shakeup in President Bush's economic team. Treasury Secretary Paul O'Neill and senior White House economic adviser Larry Lindsey both submitted their resignations Friday. (See full story¹)

The government attributed the drop in November payrolls to continued job losses in the goods-producing sector, which includes manufacturing and construction jobs. That sector cut 51,000 jobs from its payrolls. Within that category, manufacturers cut 45,000 jobs while construction jobs were trimmed by 4,000.

The retail-trade industry cut a surprising 39,000 jobs, which the government said was "weaker than usual." Retailers typically add seasonal workers this time of year.

The report also showed that average hourly earnings rose four cents, or 0.3%, to $14.93 in November after the same percentage increase in October, suggesting that inflationary risks remain low.

The weak employment report adds to evidence that the economy has slowed since the summer. The economy grew at a 4% annual rate in the third quarter but is expected to grow less than 2% in the current, fourth quarter. Businesses have grown skittish about making new capital investments or expanding payrolls, instead opting to wait for a clear sign about the economy's direction.

Manufacturing activity has slowed sharply along with consumer spending. Reports on retail sales this week also showed that sales were weaker than expected in November despite strong sales over the Thanksgiving weekend.

The average work week remained unchanged, a sign of lackluster economic activity. In November, the week lasted 34.2 hours.

The government revised its estimates of payrolls and the average work week in October. Payrolls were revised to a gain of 6,000 from the 5,000 drop previously estimated. The average work week was revised to 34.2 hours from 34.1 hours.

Updated December 6, 2002 10:27 a.m. EST