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Unemployment Rate at 4.2 PercentAired February 2, 2001 - 8:32 a.m. ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL LIN, CNN ANCHOR: And this just in to the CNN Center: All morning, we have been waiting for the unemployment figures. They have just come out of the Labor Department, and they are higher than anticipated: Unemployment rose from four percent up to 4.2 percent -- these figures just in.
So joining us right now is John Challenger. He's is an employment analyst with Challenger, Gray & Christmas.
John, what do you read into these numbers.
JOHN CHALLENGER, CHALLENGER, GRAY & CHRISTMAS: Well, certainly, we have been expecting these numbers to go up. It's been a question of not if, but when. Now we're starting to see this unemployment move up to the 4.2 that's just been announced. It's probably more coming, because the economy seems to be in freefall.
LIN: So how many people is that? How many more people than the previous figure, .2 percent?
CHALLENGER: I don't know.
LIN: OK, well, we've heard a job figure as much as 200,000 jobs eliminated just in the month of January alone. So are we likely to see this trend continuing?
CHALLENGER: Certainly, the layoffs have jumped. Starting in December, we saw over 133,000 jobs announced that were cut in December. January has been more of the same -- daily flurries of large layoff announcements. This General Electric one that's rumored -- they're probably scrambling to get a hold of -- that would -- if it does reach 75,000, it would be the single biggest layoff we've seen in the last 10 years, rivaling the 74,000 that General Motors did back in December of 1991.
LIN: And what's worse is the figures that you're talking about now, as well as other figures from Lucent, AOL, Chrysler, General Motors, none of those layoffs announced this month are reflected in this new higher number from the Labor Department.
CHALLENGER: Exactly right. Those are layoffs going forward. Companies, when they announce layoffs, roll those out over the next several months and sometimes even over the next couple of years. No company can make a big layoff right away, lay all those people off right away, because the companies would fall apart. So they are signs of where this economy is heading and where the unemployment rate is heading, as well.
LIN: So let's look deeper into this number. you not only look at the flat number itself, but you also look at some other data coming out of the Labor Department, like, for example, the number of hours worked by employees. Why is that important?
CHALLENGER: That's a critical number to look at. If it is flat or going down, it is another sign that this economy is slowing down rapidly. What employers do -- no employer wants to lay off people, and so they take many steps first to avoid that kind of action, that severe action, especially given the strength of the economy and the position many companies were stuck with last year, when had so many orders in the books and they didn't have enough people to fill them.
So if hourly works (ph) now begins to go down -- hours worked -- it's going to mean that employers are taking many steps to get those costs in line with reduced revenue expectations.
LIN: Well, John, you know what's confusing: Still on front page, I think it was "The New York Times" today, the business section reported that sales are up in January, and that retail sales are coming back, and in fact, people are still snapping up luxury items and even buying cars. So how do you reconcile that with the layoffs?
CHALLENGER: Well, there conflicting are some conflicting signs. Housing was up, as well, in December -- very surprising. So consumer confidence down, down significantly; it dropped like it has -- we've not seen since it since the last recession. The disappointing holiday season we're kind of -- it was another sign that consumers just weren't buying like we'd expected.
But it isn't going to happen, as the slowdown rolls out, in one fell swoop. What's going to happen is over time, people are going to begin to look at their 401(k)s and see that the -- with the stock market drop last year, that just isn't the same as it used to be; they're going to look at their energy bills; and over time, they're going to begin to slowdown. we're seeing a lot of evidence right now. But certainly not across-the-board evidence.
LIN: Right -- all right, well, we'll still have to keep it in perspective. It is still record-low unemployment. And we can hope for the best. The economy is still officially not in a recession.
John Challenger, stand by as we continue our coverage on the economy.
Let's go to Brooks Jackson. He is outside the Labor Department now.
Brooks, there must have been a huge run for these numbers, special interest today with all the news of layoffs this month.
BROOKS JACKSON, CNN CORRESPONDENT: Well, that's right, Carol. This is perhaps one of the most closely watched unemployment releases that I can remember, a big crowd inside what we call the lock-up, where reporters are brought in, given release half an hour ahead of time but kept in a locked room until precisely 8:30, when we can report.
And what we're finding is that although the unemployment rate did go up to 4.2 percent, there is some surprisingly strong news: Actually, the economy has not slowed; in fact, it's continued to grow, adding 268,000 jobs in January -- that's triple the amount that economists had been expecting
LIN: Brooks, why is it that it's so important that they keep you locked in this room so that the news is released simultaneously?
JACKSON: Well, this is the kind of news, Carol, that can move financial markets. If somebody got some of this information ahead of time, they'd have an edge in trading bonds or stocks. So it's very sensitive; it's like the consumer price index and many other indicators around town. It's important that everybody gets -- everybody in the public, at least -- gets this information at exactly the right time so that nobody gets an unfair advantage.
LIN: All right, Brooks Jackson, well, you gave us the advantage this morning, standing outside the Labor Department.
And once again, our thanks to John Challenger. He is the employment analyst at Challenger, Gray & Christmas.
We will continue our business coverage as we go on to another story here of layoffs.
The employment picture is more than a little gloomy not far from, in fact, where I'm sitting. Nearly as quick as the click of a mouse, the online service Amazon.com has come and gone in McDonough, Georgia.
CNN national correspondent Gary Tuchman paid a visit.
GARY TUCHMAN, CNN CORRESPONDENT: In the picturesque town square of McDonough, Georgia, county seat of Henry county, it's the main topic of conversation.
UNIDENTIFIED MALE: It's a shock to us.
TUCHMAN: Gary Freedman (ph) is a county commissioner. His shock is matched and raised by Colin Phillips (ph), who had been a proud employee of Amazon.com.
UNIDENTIFIED MALE: I just want to take some time off, regroup, just back up, and regroup, spend some time with my family.
TUCHMAN: Amazon opened a distribution center here for its online plethora of products in November, 1999. But now, the company is in the process of closing the 800,000-square-foot facility permanently. The signs have been taken down, and all 442 of the Georgia workers have been laid off. UNIDENTIFIED MALE: We worked hard to get them here. We negotiated with them to get them here, help them come here -- and they were a good neighbor, they were a good citizen in the county.
TUCHMAN: The announcement of the shutdown took people by surprise.
And now, at Grit's (ph) family restaurant in McDonough, where Colin Phillips had some lunch, his sister tried to cheer him up.
UNIDENTIFIED FEMALE: Just look at it like this: you'll find something bigger and better.
TUCHMAN: The good news is he very well may, because this is still considered an economically healthy county, just south of booming Atlanta. Amazon's closing is a blow, but with other big businesses open, there appears to be no panic.
UNIDENTIFIED MALE: Certainly, the employees, at this point, are feeling some shock, probably, but I think they'll see that there will be plenty of opportunities around for them to get with other good quality companies.
TUCHMAN: The hope here was that Amazon.com would prosper, even add hundreds more jobs in this county, but at least for now, that won't happen. All the former Amazon employees will get two months pay and benefits.
(on camera): Most people here thought it was pretty special to have such a high-profile company in their midst, but soon, McDonough, Georgia's, only connection with Amazon.com will be an Internet connection.
Gary Tuchman, CNN, McDonough, Georgia.
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