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US Economy: More Jobs Created in May Than Expected - 2002-06-07

The U.S. economy created more jobs than expected in May and the unemployment rate fell slightly. But stock prices fell on the news as the long-suffering markets focused instead on signs of continuing weakness in the economy.

The unemployment rate fell two-tenths of one percent to 5.8 percent. The economy added 41,000 new jobs in May, the biggest gain in 15 months. The U.S. economy has been in a recession that started in March of last year. Experts tend to think an upturn began around the beginning of this year but there as yet has been no confirmation that the recession is over.

Financial markets shrugged off the positive unemployment report with both the technology heavy Nasdaq and the Dow Jones industrials continuing a decline that began two weeks ago. Instead of the jobs report, investors focused on a warning of more hard times from computer chip maker Intel. Its shares fell nearly 20 percent Friday. Many high-tech stocks are trading at lowest levels in 12 months. The stock market is well below its peak of two years ago.

Christine Benz is a mutual fund analyst at Morningstar financial in Chicago. She said investors are turning away from high-tech stocks. "I think investors have shown a heck of a lot of patience with the market. We have seen a lot of action in the small and mid-cap value funds. Investors are embracing them," Ms. Benz said.

Unemployment was at a 7.5 year high of six percent in April. The economy - like the stock market - showed signs of improvement earlier this year. But analysts have recently turned more skeptical and predict U.S. growth at no more than two to three percent this year, well below earlier predictions.