THE US economy did not add a single job in August according to an unrelentingly bad payrolls report, raising the stakes for US president Barack Obama ahead of a crucial policy speech next week.
A feeble 17,000 new jobs created in the private sector were offset by 17,000 government job losses, confirming recent data suggesting US growth had stalled. The weak jobs data – below Wall Street estimates of a 68,000 increase – raise the chances that the US Federal Reserve will provide further monetary stimulus.
Ben Bernanke, Fed chairman, will give a speech on the economic outlook 5½ hours before Mr Obama addresses a joint session of Congress on Thursday.
The stagnation of payrolls is an “ominous sign”, said Paul Ashworth, chief US economist at Capital Economics in Toronto, although “the economy isn’t necessarily dropping off a cliff or falling into recession”.
Forty-five thousand private jobs were lost from the survey because of a strike at the telecoms company Verizon, but that was offset by the return of 22,000 workers who were missing last month because of a state government shutdown in Minnesota.
The unemployment rate held steady at 9.1 per cent as there was an increase in employment on the separate, but less reliable, survey of households.
“What I fear is happening is that there’s a consumer confidence drop because people worry about what is happening with the Congress,” Hilda Solis, secretary of the Labour department, said.
Mr Obama is likely to propose an extension of a 2 percentage point payroll tax holiday into next year; an extension of long-term unemployment benefits; measures to encourage spending on infrastructure; and fresh ideas in areas such as housing.
“Private sector job growth continues to be undermined by the triple threat of higher taxes, more failed ‘stimulus’ spending and excessive federal regulations,” said John Boehner, the Republican Speaker.
Mr Obama’s room for manoeuvre is constrained by Republican attacks over budget deficits and partisanship in Washington as attention turns towards next year’s presidential election.
US markets were lower with the SP 500 down 2.53 per cent. – (Copyright The Financial Times Limited 2011)
* The Fed may decide at its September meeting to replace short-term Treasury securities in its $1.65 trillion portfolio with long-term bonds in a bid to lower rates on everything from mortgages to car loans, said economists at Wells Fargo and Co.
The Fed’s influence on the economy will probably be muted as sagging consumer confidence, depressed home values and 6 million workers unemployed for six months or more weigh on demand.
“The problem is that rates have been low for three years now and that isn’t spurring people to buy,” said John Silvia, chief economist at Wells Fargo in Charlotte, NC
“Companies won’t hire unless demand is there. The Fed can lower the cost of credit, but it can’t force companies to create jobs,” he added.
