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US Jobless Rate Unexpectedly Up - 2002-05-03

The U.S. jobless rate rose to a higher than expected six percent last month. Financial markets were caught off guard by the increase, which is interpreted as a sign that the economic recovery may not be as robust as initially thought.

Even though the economy has been growing since at least December, the jobless rate in April rose 0.3 percent to its highest level in nearly eight years. The U.S. economy created only 43,000 jobs last month, less than had been expected. Revised labor department figures show that nearly 130,000 jobs were lost in the January to March period.

Mickey Levy, chief economist at Bank of America in New York, is unperturbed by the latest figures. He says it is normal for the jobless rate to rise during the first few months of a rebound from recession.

"Keep in mind that this is following a typical, early recovery pattern where businesses increase production without increasing employment. It always happens," he said on CNBC television. "So basically what you have is that industrial production is increasing rapidly while employment is chopping sideways."

Wall Street reacted by focusing on what appears to be confirmation that economic growth is slower than expected. Stock prices fell sharply as investors assessed the unemployment report. Last week there was a gross domestic product report that showed the economy registering rapid 5.8 percent growth in the first quarter.

The U.S. economy, which had expanded continually for 10 years, slipped into recession in March, 2001. Impacted by 11 central bank interest rate cuts in 2001, the slowdown was shallow and of short duration. Despite interest rates being at very low levels given the fresh signs of lagging growth the Federal Reserve is not likely to begin to raise rates anytime soon.