Unemployment Rising, Car Sales Falling

Dismal manufacturing activity, soaring job losses and a record slump in car sales added to pressure on Congress yesterday to reach a deal on the Bush administration's contentious $700bn emergency economic bail-out package.

Gloomy economic news sent the Dow Jones industrial average down by more than 200 points at one stage during another volatile day on Wall Street, although the blue-chip index later recovered to close down 19 at 10,831.

A key measure of US manufacturing output showed that activity has shrunk to its lowest level for seven years as orders dry up. The Institute of Supply Management said its index fell from 49.9 to 43.5 in September, the sharpest monthly drop since 1984.

Motor manufacturers revealed huge drops in sales during September. Ford, Toyota, Nissan and Chrysler each said that activity in showrooms was down by more than 30% as dealers struggle to secure the financing to write car loans. "Consumers and businesses are in a very fragile place," said Ford's marketing chief, John Farley.

Bad news fueled calls for a swift resolution of Congress's two-week battle over the White House's proposed bail-out. "There's a real sense that something needs to be done," said Julia Coronado, a senior US economist at Barclays Capital in New York.

A study published yesterday revealed that the struggling US financial services industry has shed 111,201 jobs so far this year. Carmakers are close behind with 94,918 redundancies according to employment consultants Challenger, Gray & Christmas. The combination of erosion in both employment and manufacturing activity alarmed analysts. On the credit markets, a surge this week in the Libor rate at which banks borrow money from each other is causing particular concern, indicating that the flow of cash is freezing up. "For the first time it's really starting to look like a recession," said Marc Pado, chief US market strategist at broker Cantor Fitzgerald in San Francisco.

The price of oil dipped below $100 per barrel in New York to close at $98.53, a fall of $2.11, on evidence that Americans are driving less. Even the flow of money sent home to Mexico by migrant workers in the US is down, falling by 12%, the biggest drop on record.

The mood on Wall Street is so sour that a traditional daily ceremony to ring the New York Stock Exchange's opening and closing bell has been disrupted. A Broadway actor, Missi Pyle, who was supposed to do the job this week, dropped out on the grounds that a cheerful celebrity appearance felt inappropriate.