November 4, 2001	Sunday	Shaba’an 17, 1422

WASHINGTON, Nov 3: The United States, reeling from the deadly September 11, attacks, faces rising unemployment, plummeting consumer spending and faltering buyer confidence all of which could plunge the world’s largest economy into a deep recession.

The US Labour Department reported Friday that 415,000 jobs were lost in October, signaling a jump in the unemployment rate to 5.4 per cent, the largest single-month jump since May 1980.

The US economy was already faltering by the start of the third quarter of 2001, following a lengthy growth period fueled by the booming Internet economy of the 1990s. But the September 11 terror attacks, the figures show, have choked any chances of a quick recovery.

The grim figures prompted President George W. Bush to urge Congress to push through an economic stimulus plan.

Bush wants the Senate to approve a House-passed stimulus package that focuses on tax cuts and corporate investment incentives, but opposition Democrats say the measure does too little for workers.

Since employment peaked last March, the US has lost almost 900,000 jobs, said Bruce Steinberg, chief economist at Merrill Lynch.

During the 1990-91 recession, the economy lost 1.8 million jobs and the current recession will probably end up leading to similar job loss, Steinberg said. We expect heavy job loss into early 2002. The unemployment rate is probably headed for at least 6.5 per cent.

Ana Philip, an analyst for Barclay’s Capital, expressed a similarly gloomy outlook for US employment figures.

We now expect a peak unemployment rate of about 6.5 per cent sometime in the first half of next year, 0.5 per cent higher than our previously projected peak, she added.

Beyond the immediate hardship for the hundreds of thousands of Americans with no jobs, the unemployment figures were also expected to strengthen US pessimism about the economic future, and discourage consumers from reaching for their wallets during the all-important Christmas shopping season.

Consumer spending is “likely to weaken severely” in the run-up to Christmas and into the first quarter of 2002, Steinberg predicted.

Consumer spending represents two-thirds of total US economic growth, and until recently it was the driving force behind the US economy.

According to Commerce Department figures released on Thursday, US consumer spending took its steepest dive in 14 years in September, plunging 1.8 per cent after a 0.3 per cent increase in August.

A private survey released October 29 by the Conference Board showed US consumer confidence plummeted to a seven-year low during the month, suggesting that the spending drop could be a long-term trend.

The week’s economic data, all worse than anticipated, forced analysts to re-evaluate their forecasts for a brief recession followed by a strong surge in economic growth at the start of 2002.

Several experts are now looking for growth to recede at least until the end of the first quarter of 2002. Gross domestic product (GDP) declined at an annual rate of 0.4pc in the July-September quarter the first drop since 1993 and the steepest since 1991.

Recession is likely to persist into the first quarter, said Merrill Lynch’s Steinberg.

US business leaders share analysts’ pessimism about the state of the US economy.

Moreover, 86pc of those polled said growth would remain under 2.5pc in the second quarter of 2002.

Coming on the heels of (Thursday’s) reported decline in gross domestic product, the expectations of the CEOs reflected in the survey paint a grim picture of the months ahead, said Jerry Jasinowski.—AFP