Excluding transportation, orders fell 0.8 percent to their lowest level since April, the Commerce Department said. Orders were down sharply for computers, office equipment and communications products. Primary metals, including steel, posted the largest drop since October 1998. Shipments, a barometer of current production, fell by 0.2 percent, the fourth straight monthly decline. Seeking to prevent the ailing economy from slipping into recession, the Federal Reserve this week cut interest rates by a half point, the second such reduction in the space of just three weeks.
Economists expect further rate reductions to spark economic growth.
The severity of the drop in economic activity caught the Fed by surprise, but private analysts believe the aggressive interest rate cuts with the promise of more to come should be enough to keep the country out of recession. The jobless rate had been at 4 percent in both November and December, but with the sharp slowdown in overall economic activity, economists are forecasting the jobless rate could rise to above 5 percent by the end of 2001. Payrolls Grow, Hourly Earnings Unchanged Even with the sharp rise in unemployment, payroll growth posted a sizable gain of 268,000 in January, but more than half of that came from an increase of 145,000 jobs in construction. The government said this reflected a rebound after unusually harsh weather in November and December, which resulted in huge layoffs. The length of the average work week, which had posted a big drop in December, rebounded slightly to 34.3 hours in January.