Steps taken which create the problem:
1. New category created: "News" (slug is "news").
2. Short test post is written under the new category.
3. "News" category link is clicked on the site homepage.
4. "Page Not Found" is returned, with the url: http://www.sitename/blogs/category/news
5. A check of the files on the server reveals no "category" folder (therefore no "news" subfolder).
I read in a post on these forums that WordPress does not create the category folders on the server. If so, then why does the url created by WordPress after creating a new category and clicking on its link contain the "category" folder and "news" subfolder?