Joblessness Hits a 2-Year High; Recession Is Feared

The nation’s unemployment rate shot up to 5.5% last month, its highest level in two years, the government said Friday in a report renewing fears that the economy may be toppling into a recession.

“The economy appears to be caving in to a full-fledged recession. The jump in the unemployment rate is the telling sign,” said Allen Sinai, chief economist at the Boston Co.

On Wall Street, the stock market sold off sharply amid the new recession fears and Middle East oil concerns. The Dow Jones average of 30 industrials, down more than 120 points at its midsession low, closed with a 54.95-point loss at 2,809.65.

The Labor Department’s unemployment report showed widespread weakness in the job market as payrolls fell by 219,000 jobs.

That number was bloated by the 160,000 temporary census workers the government laid off, but other sectors of the economy posted job losses too.

“It’s one more nail in the coffin of the economic boon. . . . It’s pretty clear evidence the economy is in big trouble,” said Irwin Kellner, chief economist of Manufacturers Hanover Trust.

The Bush Administration interpreted the numbers differently. Spokesman Marlin Fitzwater said the report “does reinforce our concern for getting the deficit under control” but said the economy is still growing. “We don’t see a recession,” he said.

But Richard Rahn, chief economist for the U.S. Chamber of Commerce, said the U.S. economy “is not going to hang on much longer.”