CNNfn's Lisa Leiter: December unemployment figures and the economy

Lisa Leiter is a Chicago-based correspondent for CNNfn, the financial network of CNN News Group.

CNN Moderator: The government is reporting that the economy grew by 105,000 jobs in December, although that number was below Wall Street forecasts for an increase of about 133,000. How disappointing is that to investors?

Lisa Leiter: Well, the total number is pretty much in line with what Wall Street was expecting, but why it is somewhat disappointing is that over half of those jobs came from the government. Business only created 49,000 jobs, which is a much slower rate of growth than we've seen so far in the past year.

CNN Moderator: Which industries have been most affected?

Lisa Leiter: Manufacturing jobs have been lost at a disturbing pace in December. The number of factory jobs fell by 62,000 and overall factories lost 580,000 jobs since the last peak in factory employment in April of 1998, so we've seen a steady and increasing number of job losses in manufacturing. Also, service jobs are being created and that's offsetting the losses in factory jobs

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Question from Jeff: Lisa...how low will interest rates go and will they offset the unemployment news?

Lisa Leiter: Well, there are some economists who think we could see another full percentage point decline in key short term interest rates this year. Some even think the Federal Reserve will cut short-term rates again as soon as the end of this month. This report, some think, could diminish the argument for another aggressive move by the Fed in the next few weeks because the unemployment rate is so low. At 4 percent it was unchanged from November and some people were looking for an unemployment rate as high 4.2 percent.

CNN Moderator: In a statement, Secretary of Labor Alexis M. Herman remained very upbeat about the economy. What is the basis for this optimism and can her words have a calming effect?

Lisa Leiter: The basis for any optimism following this report would have to come from the historically low unemployment rate, very close to a thirty year low. People who were bracing for an even weaker report because a report yesterday showed layoffs last month were being announced at their highest level on record may be encouraged by this report today, not coming in as weak as they might have thought. In fact, some people were even looking for negative job growth.

Question from Jeff: Will the short-term interest rate drop affect home mortgage rates?

Lisa Leiter: Actually, most mortgage rates are tied to the yield on the ten-year note in the bond market. That yield has been falling sharply in recent months in anticipation that the Fed would cut rates. So we've already seen a decline in mortgage rates since the summer, and if the bond market continues to believe that the Fed will keep cutting rates and yields continue to fall, then mortgage rates could keep falling as well.

CNN Moderator: What do experts advise investors to do given the present economy?

Lisa Leiter: In a slowing economy, some market analysts have been advising investors to put money into companies they know--established companies that have a record of delivering solid profit growth.

CNN Moderator: Do you have any final thoughts for us today?

Lisa Leiter: It seems as though the immediate read on this report is that it's somewhat mixed, while the unemployment rate is hovering near a 30 year low, there are troubling and increasing signs of slowing job growth. More people each week are filing for new unemployment benefits, and just yesterday we learned that layoffs are on the rise as well. So the great job market that Americans have been enjoying for the past few years is beginning to show signs of getting tougher.

CNN Moderator: Thank you for joining us today, Lisa Leiter.

Lisa Leiter: Thank you very much and it was nice chatting with all of you.

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U.S. unemployment steady
January 5, 2001
More losses on Wall St.
January 5, 2001