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US Unemployment on the Rise - 2003-03-07

The U.S. economy lost jobs at a rapid pace last month. The unemployment rate rose 0.1 percent to 5.8 percent. The new jobless numbers are giving rise to worries about a renewed economic downturn.

Over 300,000 jobs were lost in February, the biggest drop since November 2001, when the economy was buffeted by uncertainties associated with the September terrorist attacks on Washington and New York.

The call up of military reservists is being blamed for many of the lost jobs. Financial markets had anticipated a net gain in jobs in February. Diane Swonk, chief economist at Bank One in Chicago, says several factors help explain the unexpected job loss. "Weather, war, and worries," she said. "That's sort of the three W's that describe the U.S. economy today. But it's real. We've also seen since mid-February an absence of the usual snapback in retail spending, as people try to catch up after weather-related disruption. And part of that is because we have higher oil prices. There's a real economic impact of war worries."

Gasoline prices have have risen by 50 percent over the past year, a factor contributing to a slowdown in economic activity. Some economists see the jobs report as evidence that a renewed economic downturn or recession is ahead. Ms. Swonk dismisses that worry, but concedes there are similarities to the 1991 recession. "There's a lot of déjŕ vu going on," she said. "You've got Bush in the White House, soldiers on the border with Iraq, high oil prices and collapse in consumer confidence. Everybody says 'oh my gosh it is a repeat of 1991.' Similarities do not mean sameness."

Ms. Swonk says the U.S. economy is stronger than it was 12 years ago, as personal incomes are still rising, and millions of homeowners are making lower home mortgage payments, as loans have been restructured to benefit from a four-decade low in interest rates. She expects oil prices to fall sharply in the months ahead.