THE US suffered another month of mediocre job growth in September, adding to Democrats’ pain as they head into mid-term elections to Congress and increasing chances that the Federal Reserve will restart quantitative easing, increasing the money supply.
The private sector created 64,000 jobs in September, but overall payrolls fell by 95,000 as the government laid off workers. The unemployment rate held steady at 9.6 per cent, the labour department said yesterday.
Some traders welcomed the release as a sign that the Fed could step in with further quantitative easing, boosting stocks and treasuries but hitting the dollar. The dollar, which had been rising, fell 0.2 per cent against a basket of currencies and against the yen it briefly fell below 82 for the first time since 1995.
The job losses were worse than the decline of 5,000 expected in a survey of economists by Bloomberg, reflecting the unexpected loss of 76,000 local government jobs, in addition to 77,000 temporary census workers. That suggests that state and local governments are cutting jobs in response to budget pressures and shows how last year’s fading stimulus is starting to hit the economy.
The disappointing figures came as the treasury department announced a $1.5 billion funding package to spur small business lending. The money will be allocated on a state-by-state basis and treasury predicts it will generate an additional $15 billion in additional private lending.
The US needs to create about 200,000 jobs a month in order to keep up with population growth, let alone cut unemployment, and the weakness of the labour market has been one of the most troubling signs that the recovery has stalled. The weakening has led the Fed to consider whether it should start expanding its balance sheet again to drive down long-term interest rates and stimulate the economy. – Copyright The Financial Times Limited 2010
