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Job Losses, Housing Slump Point to Weaker US Economy

The U.S. stock market held onto gains Tuesday (September 11th). The New York composite index rose 139 points and the Dow Jones gained 180 points, buoyed in part by a narrowing U.S. trade deficit and renewed hopes that the Federal Reserve will step in to lower its key interest rate.

Despite the rally, disappointing job figures and the continuing slump in the housing market have some analysts forecasting the slowest economic growth in the U.S. in five years. VOA's Mil Arcega reports.

The U.S. markets reacted predictably last Friday (September 7th) after the August job report showed a net loss of 4,000 jobs. The Dow index tumbled and economists revised their forecasts. Financial experts say the report, marking the first monthly decline in four years, is an important economic indicator.

Bill Cheney is chief economist at the financial services firm, John Hancock. "This is a big deal and it definitely tells us that, overall, the performance of the economy over the last few months is quite a bit weaker than we thought it was."

Workers in businesses directly tied to housing have taken the hardest hit. Home construction lost 22,000 jobs. And government payrolls shrank as revenue from property taxes dried up.

Mortgage broker Jim Dell'Anno was laid off last week after 25 years in real estate. "It doesn't shock us at all when things like this happen. It's just, you're always [shocked], when it's yourself."

Analysts say the job losses, including 12,000 at Countrywide, one of the largest mortgage lenders in the U.S., aggravates the risk of a recession. A recession is traditionally defined as a decline in the gross domestic product (GDP) for six months or more.

Economist Bill Cheney of John Hancock believes the Fed will try to bolster the economy by shaving at least one quarter of a percentage point from its key interest rate when it meets next week. "I'm looking for the Fed to administer a stronger dose than I would have expected yesterday."

Investors nervous about the U.S. economy received some relief this week after a government report showed the country's trade deficit decreased slightly in July.