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The Economy in Perspective

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The gravity of the situation … This morning the Bureau of Labor Statistics reported that payroll employment declined by more than 200,000 people in April, a much larger number than private analysts had expected. Not only had employment weakened further in the already beleaguered manufacturing sector, but it had also softened in the service sector. The unemployment rate drifted up from 4.3% to 4.5%. Market opinion cheered this development, sensing that it would spur the Federal Reserve to reduce the federal funds rate another 50 basis points at its May 15 meeting. Market sentiment had already anticipated a funds rate cut because the FOMC had reduced the funds rate 50 basis points in a surprise inter-meeting move on April 18, and market participants reckoned that such an action signaled a predisposition to move again if economic data continued to be weak. The employment report was the coup de grace.


Suggested citation: "The Economy in Perspective," Federal Reserve Bank of Cleveland, Economic Trends, no. 01-05, pp. 01, 05.01.2001.

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