The US economy shed 5,000 jobs in October and gloom at factories deepened, leading economists to fret the recovery may be stalling and to wager the Federal Reserve will trim interest rates next week.
The prospect of cheaper credit encouraged a stocks rally, but bond prices fell amid disappointment the case for an aggressive cut was not as clear-cut as some expected.
Last month's job losses marked the second straight decline in the number of workers on US payrolls, the Labor Department said Friday. Hours worked decreased and the unemployment rate rose to 5.7 percent in October from 5.6 percent in September.
Factory jobs tumbled by 49,000 this year, reflecting a worsening of the slump in the industrial sector that was underscored by a report from the private Institute for Supply Management.
ISM's factory index fell to 48.5 in October from September's 49.5. Any reading below 50 shows shrinkage in the manufacturing industry.
Most analysts now expect a quarter percentage point reduction in short-term rates when the Fed meets on Wednesday, though many said the latest batch of economic numbers did not depict the kind of dire scenario that would prompt a more aggressive half-point cut in borrowing costs.
"I think the economy is weak enough that we will get a Federal Reserve rate cut next week," said Harvey Katz, chief economist at Value Line Inc, a research firm in New York.
A Reuters poll of 22 leading Wall Street bond firms showed that all but one projected a cut by the Fed in short-term rates next week. Fifteen dealers predicted a quarter-point move and six forecast a half-point cut.
While Wall Street digested the interest-rate implications of the data, Democrats pounced on the economic fragility as a key issue for Tuesday's congressional elections.
With Democrats and Republicans locked in a heated race for control of the Senate and House of Representatives, Democrats suggested Republican President George W. Bush was to blame for the economy's woes.
"Since Republicans took the White House, total payrolls have declined by almost 1.5 million jobs. The time is long overdue for the Republicans to admit the economy is in trouble and to sit down with Democrats to work out a solution," Representative John Spratt, ranking Democrat on the House Budget Committee, said.
For his part, Bush said the fact the US economy lost jobs last month was "a problem" but that the foundation for growth was strong.
The US economy grew at a respectable rate of 3.1 percent in the third quarter. Still, that number was boosted by strong car sales that have since turned lower.
Bolstering that view was a report from the Commerce Department showing that consumer spending, a key driver of the economy, fell 0.4 percent in September, its first drop since November 2001. Personal income grew by 0.4 percent in the month.
Measures of consumer confidence have slid for the past five months and this accelerated in October as fears of a war on Iraq, a weak job market and punishing losses in stock markets weighed on consumers' views.
October was a sluggish month for auto makers.
General Motors said its US auto sales in October fell 32 percent. Ford said its US vehicle sales fell 31 percent in October from the same month last year.
WASHINGTON’S INCENTIVES: The CHIPS Act set aside US$39 billion in direct grants to persuade the world’s top semiconductor companies to make chips on US soil The US plans to award more than US$6 billion to Samsung Electronics Co, helping the chipmaker expand beyond a project in Texas it has already announced, people familiar with the matter said. The money from the 2022 CHIPS and Science Act would be one of several major awards that the US Department of Commerce is expected to announce in the coming weeks, including a grant of more than US$5 billion to Samsung’s rival, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), people familiar with the plans said. The people spoke on condition of anonymity in advance of the official announcements. The federal funding for
HIGH DEMAND: The firm has strong capabilities of providing key components including liquid cooling technology needed for AI servers, chairman Young Liu said Hon Hai Precision Industry Co (鴻海精密) yesterday revised its revenue outlook for this year to “significant” growth from a “neutral” view forecast five months ago, due to strong demand for artificial intelligence (AI) servers from cloud service providers. Hon Hai, a major assembler of iPhones that is also known as Foxconn, expects AI server revenues to soar more than 40 percent annually this year, chairman Young Liu (劉揚偉) told investors. The robust growth would uplift revenue contribution from AI servers to 40 percent of the company’s overall server revenue this year, from 30 percent last year, Liu said. In the three-year period
LONG HAUL: Largan Energy Materials’ TNO-based lithium-ion batteries are expected to charge in five minutes and last about 20 years, far surpassing conventional technology Largan Precision Co (大立光) has formed a joint venture with the Industrial Technology Research Institute (ITRI, 工研院) to produce fast-charging, long-life lithium-ion batteries for electric vehicles, mobile electronics and electric storage units, the camera lens supplier for Apple Inc’s iPhones said yesterday. Largan Energy Materials Co (萬溢能源材料), established in January, is developing high-energy, fast-charging, long-life lithium-ion batteries using titanium niobium oxide (TNO) anodes, it said. TNO-based batteries can be fully charged in five minutes and have a lifespan of 20 years, a major advantage over the two to four hours of charging time needed for conventional graphite-anode-based batteries, Largan said in a
Taiwan is one of the first countries to benefit from the artificial intelligence (AI) boom, but because that is largely down to a single company it also represents a risk, former Google Taiwan managing director Chien Lee-feng (簡立峰) said at an AI forum in Taipei yesterday. Speaking at the forum on how generative AI can generate possibilities for all walks of life, Chien said Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) — currently among the world’s 10 most-valuable companies due to continued optimism about AI — ensures Taiwan is one of the economies to benefit most from AI. “This is because AI is