Unemployment Rate Jumps to 4.5%

WASHINGTON – The U.S. economy lost jobs at the fastest clip in ten years and the unemployment rate for the month of April shot up to 4.5 percent, the Labor Department said on Friday in a report that's certain to increase already serious concerns about the U.S. economy's health.

The increase of 0.2 percentage point in the unemployment rate marked the second straight month the jobless rate had gone up. In March, the jobless rate ticked up a notch to 4.3 percent. April's rate was the highest since October 1998, when unemployment also stood at 4.5 percent.

Businesses slashed their payrolls by the largest amount since the last recession in 1991.

Meanwhile, the number of workers on nonfarm payrolls fell 223,000 jobs in April, the second straight monthly decline and strikingly weaker than the 5,000 increase predicted by U.S. economists.

April's payrolls decline was the steepest since a 259,000 job loss in February 1991, just before the last recession ended in March of that year.

Both the increase in the unemployment rate and the cut in jobs surprised many analysts. They were predicting that the unemployment rate would rise to 4.4 percent and that businesses actually would add jobs during the month.

Businesses cut their payrolls in April by 223,000 jobs, the largest reduction since February 1991, when payrolls fell by 259,000. It was the second month in a row that businesses trimmed their payrolls. In March, payrolls fell by 53,000, according to revised figures, a smaller reduction than the government previously reported.

In April, job losses were widespread except in retail and government, which added to their payrolls.

The unemployment numbers follow the Federal Reserve's surprise interest rate cut by one-half point last month - the fourth reduction this year in the Fed's campaign to ward off recession. Analysts have said further rate cuts are likely at the central bank's May 15 meeting.

Consumers Might React by Slashing Spendings

With unemployment expected to continue inching up, some economists worry that consumers might rein in spending and further weaken the struggling economy.

Consumer spending accounts for two-thirds of all economic activity and has helped buoy the economy during the downturn.

Some companies are coping by sharply cutting production, leading to reductions in workers' hours and overtime, and forcing thousands of layoffs.

The New York Times announced this week that it would cut 100 jobs after already laying off 100 people at its online unit and offering buyouts to other employees. That followed recent announcements at Morgan Stanley, Honeywell International Inc., LM Ericsson and Texas Instruments Inc.

Friday's report showed that manufacturing, which has been bearing the brunt of the economic slowdown, continued to hemorrhage, losing a huge 104,000 jobs last month. Declines since June have totaled 554,000 and two-thirds of those job losses have occurred in the past four months.

Construction, which had been adding jobs over the last several months, lost 64,000 jobs in April. The government said the drop may reflect in part heavy rains over part of the country. The construction and housing businesses have remained healthy during the economic slowdown - a key force in keeping the economy out of recession.

Business services cut 121,000 jobs in April. Temporary employment services experienced another sharp decline of 108,000 last month, and have lost 370,000 jobs since September.

Seasonal hiring in amusement and recreation services and hotels was well below normal last month, with unemployment declines of 30,000 and 13,000, respectively.

Average hourly earnings, a key gauge of inflation, rose by 0.4 percent in April to $14.22 an hour. That matched the gain in March. The length of the average workweek was unchanged at 34.3 hours in April.