The dole queues in the United States were getting longer before the September 11th attacks but the number of people losing their jobs since then has increased sharply and the worst is yet to come, according to the US Labour department.
As part of the effort to offset the losses, President George W. Bush yesterday called on Congress to pass an economic stimulus package delivering at least $60 billion (€65.4 billion) in tax relief to American consumers and businesses, brushing aside demands by Democrats for more government spending to bolster US growth.
"In order to stimulate the economy, Congress doesn't need to spend any more money; what they need to do is to cut taxes," President Bush said, fleshing out details of his plan to shore up the flagging economy after last month's hijack attacks.
US Treasury Secretary, Mr Paul O'Neill, confirmed in Washington yesterday what is now widely predicted, that the US economy will record negative growth in the July-September quarter - the first step towards a full-blown recession, which is defined by two successive quarters of contraction.
The job losses, combined with a warning from the technology bellwether company, Sun Microsystems that it would suffer a bigger operating loss than expected and lay off up to 4,000 staff, led to a steep drop on the Dow and Nasdaq in early trading yesterday.
Around 199,000 people were laid off in manufacturing and services in September, the Labour Department said in a report which showed a sharp erosion in the job market even before the full impact of the September 11th attacks was felt. This is the steepest one-month drop since February 1991 and twice what analysts predicted.
While the unemployment rate managed to stay steady at 4.9 percent, many economists predict it could rise to more than 5.3 per cent in October.
Mr O'Neill, addressing journalists in Washington on today's G7 summit of finance ministers, acknowledged that even a federal rescue package could not prevent unemployment rates from rising.
Mr Delos Smith, senior economist with the Conference Board, a business research group, said: "Obviously, the October number is going to be very, very poor, with the unemployment rate soaring up to 5.5 to 5.6 per cent." Mr John Ryding of Bear Sterns, said: "It shows what we've been saying for months, that the economy is already in recession."
The 4.9 per cent level for the last two months is the highest since the economy began to stall a year ago, when the rate stood at 3.9 per cent, the lowest in three decades.
The Labour Department said many people who lost jobs immediately after the attacks would still have been counted as employed if they worked at least one day during September. Jobs losses to be counted in coming months include more than 200,000 airline and travel workers.
"It is likely that the events of September 11th had little effect on the September employment and unemployment figures," Ms Katharine Abraham, commissioner of the Labour Department's Bureau of Labour Statistics, said.
Sun Microsystems, which employs 250 people in Dublin, warned of a wider-than-expected fiscal first-quarter loss and plans to cut about 9 per cent of its 40,300 staff. This is the latest in a series of earnings warnings from companies like Gateway and Advanced Micro Devices, with only PC leader Dell Computer reiterating its quarterly outlook.
Sun, which makes website servers, said early yesterday it expected first-quarter revenue of $2.7 billion (€2.94 billion) to $2.9 billion, and a loss of five to seven US cents a share. Analysts were expecting earnings of four US cents a share on revenue of $3.3 billion.
Gateway also warned it would lose more than expected in its third quarter following the attacks.
