The unemployment rate in the US climbed to its highest level in six years in December, but the rate of increase declined, leading to hopes that the nine-month-old US recession, which has stalled the global economy, is at last coming to an end.
Wall Street climbed to highs not seen since before the September 11th attacks as other economic data boosted the view that the economy was heading for recovery.
After 17 months of contraction, the vast US services economy registered growth for a second straight month in December, according to a report released yesterday. Reports last week indicated consumer confidence rebounding and home sales surging, along with a rise in construction activity.
A survey of 55 top US economists published yesterday in New York showed a consensus forecast that growth would return in the first quarter of 2002 and rise to 3.6 per cent after the summer.
The US unemployment rate climbed from a revised 5.6 per cent rate in November to 5.8 per cent in December, the highest since March 1995, the US Labour Department said yesterday.
Since the US recession began in March last year, businesses have slashed 1.4 million jobs across the US and many more thousands abroad. The bleakest months were October and November when some 800,000 workers were laid off in the wake of the September 11th attacks on New York and Washington, which devastated the travel and tourism industries.
But the haemorrhaging slowed last month with job losses scaled back from 400,000 a month to 124,000, mainly in manufacturing, retail, air transport and temporary employment services.
There was also some evidence in the report of renewed economic activity in December, with the factory work-week increased by 0.4 hours to 40.7 hours and factory overtime by 0.2 hours to 3.9 hours.
Despite signs of recovery, the US unemployment rate is likely to continue going up throughout 2002, with analysts forecasting it will rise to 6.5 per cent in mid-summer and level off after that. In previous recessions the rate typically peaked six months after growth revived, as employers are usually slow in building up staff numbers again.
The US recession has had a knock-on effect on employment in Ireland, helping to give IDA Ireland its worst job-creation figures in 15 years in 2001, with a fall of 3,900 in full-time employment at the companies it supports. New jobs created in the Republic during the year were just over half the record number of the previous year while job losses more than doubled.
The US Institute for Supply Management, an industry trade group, said its monthly non-manufacturing index, which measures the services sector, surged to 54.2 in December from 51.3 in November, better than Wall Street had expected. A reading over 50 signifies growth. The index had languished below 50 for the previous 17 months and fell to 40.6 after the September 11th attacks.
"I'm encouraged that this very likely is showing the beginning of a broad turnaround," said the institute's spokesman, Mr Ralph Kauffman."
The report showed the biggest increase in business activity in legal services, health services, business services, entertainment and insurance.
The transport sector bounced back after declining steeply following September 11th.