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US Employment Less Than Expected in  July - 2002-08-02

The sluggish U.S. economic recovery yielded employment growth of only 6,000 jobs in July, far less than markets had anticipated. The weak data added to the pessimism that has gripped Wall Street.

Analysts had been expecting job growth of up to 69,000 in July. They interpret the much slower growth in jobs as evidence that the already tepid recovery that began six months ago is weakening. The unemployment rate held steady at 5.9 percent.

The major stock indices, which have been weak for months, fell further on the news. The market was also disappointed by a report showing a sharp drop in manufactured goods orders. They tumbled 2.4 percent in June following a modest increase in May.

Economists say the two reports taken together show little growth in private sector activity. There is even worry that the economy could fall into a new recession, which is defined as two consecutive quarters of negative growth.

Steven East, an economist with Friedman Billings brokerage in suburban Washington, said the economy is weak in large part because of the speculative excesses of recent years.

"I think the core reason the economy is so weak, and this goes back to the recession of last year, is that there was a lot of over optimism and over investment in both inventories and plant and equipment late in the economic expansion. So we had the boom. And busts follow booms," Mr. East said.

Earlier this week the government reported modest growth in the second quarter, but again the figure was below what the markets had expected.

The Bush administration continues to predict faster growth in the latter part of the year with the growth rate accelerating to three percent. Many private sector economists, however, are revising their growth projections downwards, expecting no more than one to two percent growth for the year.