US jobless rate soars

The US unemployment rate jumped 0.5% to 5.4% in October in the starkest evidence yet that America is lurching towards recession after 10 years of uninterrupted growth.

The monthly increase was the biggest in more than 21 years as 415,00 jobs disappeared from the world's largest economy.

Today's figures from the Labour department cap a grim week of economic statistics from the US. Official figures yesterday showed that manufacturing activity in October slumped to its lowest level since the depths of the 1990-91 recession.

Earlier in the week, the commerce department reported that the economy shrank at an annual rate of 0.4% in the July-September quarter. Economists are forecasting an even bigger drop in the current October-December quarter. That would put the US officially into recession, defined as two consecutive quarters of declining economic output.

The US economy was already running out of steam after the longest boom in American history before the September 11 attacks. Now recession is a certainty. The 415,000 jobs eliminated during last month represented the biggest cut in payrolls since May 1980.

"Companies are in survival mode and they are cutting jobs to control costs," said Ken Mayland, an economist with ClearView Economics. "The tragic events of September 11 and their aftermath probably tipped the economy into recession. People are waiting for the other shoe to drop."

The 0.5% rise in October's unemployment rate also was the biggest one-month increase since May 1980. The dramatic rise in the jobless rate will put pressure on the US Federal Reserve to cut interest rates by a half-point, rather than settling for a quarter-point trim, when it next meets on November 6.

The US central bank has already cut rates nine times this year, twice since September 11 in an increasingly frantic effort to stave off recession.

Manufacturing has been hardest hit by the economic slump and has been enduring a recession of its own for months. In October, another 142,000 jobs were cut, bringing total job losses since March to more than 800,000. In the airline industry, employment fell by 42,000 and in the travel sector 11,000 jobs were cut in October. The government said these job losses reflected fallout from the attacks.

In the service sector, normally the engine of job growth in the country, employment dropped by 111,000 in October, the fourth and largest decline this year for the industry. Particularly large job losses occurred at hotels and temporary help firms.

Retailers lost 81,000 jobs in October, the second large job loss in a row. Retailers, including clothing, toy and gift shops, that normally hire in October for the holiday season failed to add jobs at their normal pace, the government said. Market reaction was muted as investors had been expecting the bleak numbers.